EU states could secure between €50 billion and €200 billion in additional revenue under an international agreement on a minimum corporate tax rate, says a report released by the EU Tax Observatory.
The scale of the increase would depend on the number of signatory countries and the rate adopted, it says.
The report, entitled Collecting the Tax Deficits of Multinational Companies: Simulations for the European Union concludes that a 25 per cent minimum rate across the EU, combined with an EU decision to tax profits earned by non-European multinationals on EU territory at the same rate, would increase EU revenue by more than €200 billion.
The Paris-based think tank was created at the initiative of the EU Parliament and is EU-funded. It is headed by Gabriel Zucman, a French economist from the University of California, Berkeley, who reportedly inspired the tax policies of the US Democratic party.
Developed countries need to offset $16 trillion spent on stimulus during the Covid-19 pandemic.
The report examines three scenarios for a minimum corporate tax rate: an international agreement, like the one being discussed at the G7 finance ministers meeting in London this weekend; an EU-wide agreement; or unilateral moves by some EU countries.
A 25 per cent minimum rate would result in €14 billion in additional revenue for Ireland – equivalent to 61.2 per cent of Ireland's health expenditure and 167.9 per cent of current Irish corporate income tax revenue, the report says, based on data from the EU and OECD.
Tax haven
Ireland and three other EU countries are labelled as tax havens in the report. Its authors admit that “tax havens would likely benefit less than what we report” because multinational corporations attracted by low tax rates might move their headquarters to what are currently high-tax countries if international agreement is reached.
Under a new mechanism, the minimum corporate tax would have to be paid regardless of where a multinational corporation is registered.
A single country – for which read Ireland – cannot block an agreement "because other countries can always choose to collect the taxes that tax havens choose not to collect. For example, the US, Germany or France can always decide to tax the profits recorded by their multinationals in Ireland at a minimum rate of 25 per cent, thus making the Irish tax rate of 12.5 per cent irrelevant," the report says.
US president Joe Biden proposed a global 21 per cent minimum corporate tax rate in April. His subsequent proposal, for a significantly lower 15 per cent, is under discussion. The average global corporate tax rate has dropped from 46 per cent in the 1980s to just over 23 per cent today.
Mr Zucman described 15 per cent as a “derisory” rate compared to the 30-40 per cent of income paid in tax by the average lower to middle class French citizen.
“The current form of globalisation . . . is neither politically nor economically sustainable,” he told the French newspaper Libération. “It means ever lower taxes paid by the big winners of globalisation, and often more taxes paid by those who benefit least.”
