Pareto-Improving Minimum Corporate Taxation

Pareto-Improving Minimum Corporate Taxation
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Volume/Issue: Volume 2021 Issue 250
Publication date: October 2021
ISBN: 9781557756183
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Topics covered in this book

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Finance , Economics- Macroeconomics , Public Finance , Taxation - General , Economics / General , Tax Competition , Minimum Taxation , Corporate Tax Reform , International Taxation , competition game , policy objective , corporate tax reform , best response , country benefit , residence country , Corporate income tax , Competition , Tax avoidance , Global

Summary

The recent international agreement on a minimum effective corporate tax rate marks a profound change in global tax arrangements. The appropriate level of that minimum, however, has been, and remains, extremely contentious. This paper explores the strategic responses to a minimum tax, which—the policy objective being to change the rules of tax competition game--—are critical for assessing the design and welfare impact of, and prospects for, this fundamental policy innovation. Analysis and calibration plausibly suggest sizable scope for minima that are Pareto-improving, benefiting low as well as high tax countries, over the uncoordinated equilibrium.