This paper studies whether multinational enterprises (MNEs) respond to international anti-tax

avoidance regulations by increasing local profit shifting activities. Within Germany, local variation of profit tax rates facilitate similar avoidance strategies on a sub-national level through the use of intellectual property or financing structures. We study whether these local schemes serve as complements orsubstitutes for international profit shifting. To explore the use of local profit shifting activities by MNEs, we construct a novel database documenting the network structures of MNEs that link international to sub-national tax havens. We hypothesize that MNEs intensify their domestic tax avoidance practices in response to stricter international regulations. Our findings highlight the adaptive strategies of MNEs in response to evolving international tax policies and underscore the complexity of recent anti-tax avoidance regulations and their consequences at both the international and local level.

We develop a methodology to decompose the tax revenue impact of the global minimum tax introduced in 2024 into several components and quantify its potential impact on profit shifting. We apply it to 34 thousand multinational-country observations from tax returns, financial statements and country-by-country reports of all multinationals active in Slovakia. We find that the global minimum tax has the potential to decrease profit shifting by most multinationals, which are on average likely to pay higher effective tax rates in most countries worldwide post-reform. We find that Slovak corporate tax revenues will increase by 4%, with half of the increase due to its minimum top-up taxes. The other half of the increase is corporate income tax on profits that will no longer be shifted out of the country. We expect the global minimum tax to target 49% of previously shifted profits.

This study examines the potential effects of a global minimum tax (GMT) on European banks' liquidity, capital adequacy ratios, and operational capacity. Utilizing estimates of Basel III ratios under GMT scenarios and stress tests by the European Banking Authority, the research highlights differential impacts on banks, suggesting that while some can bear the additional tax burden, others may face challenges, potentially endangering the banking system. The findings contribute to the discussion on the practicality and consequences of implementing a global minimum tax, emphasizing the role of tax havens in maintaining banking efficiency and raising concerns about increased corporate taxation.

The two-pillar approach focusses on BEPS issues in developing countries to a greater extent than preceding OECD agreements. In particular, the Subject-to-Tax Rule (STTR) is intended to address BEPS risks in low-income countries’ tax treaties. This article analyses the STTR alongside treaties and domestic law to understand the likely impact of the rule in the region. It also considers the diverse domestic policy landscapes to explore whether the STTR is an attractive measure for countries in East Africa. The author believes that implementation of the rule will be complex, challenging already stretched tax administrations. Furthermore, some low-income countries may prefer not to engage with reforms that increase source taxation. The analysis concludes that any hopes that the STTR will mark a major step in addressing BEPS in this part of the world are likely to be disappointed, but it could form part of a portfolio of measures for some countries.