This paper presents a simple model in which a multinational enterprise operates in multiple non-haven jurisdictions where it has real economic activity and shifts paper profits to a tax haven. In this setting, we introduce a Global Minimum Tax (GMT) and analyse its consequences for the allocation of real economic activity and for profit shifting. The GMT is binding not only in the tax haven, but also potentially in other low tax jurisdictions. These jurisdictions are negatively affected in terms of capital allocation, but the resulting increase in tax revenues may offset this loss, which would lead to a net welfare gain. Unconstrained jurisdictions may gain or lose depending on their relative effective tax rates. Since the reform creates winners and losers, we examine its welfare implications under the assumption of no tax competition among jurisdictions and derive the conditions under which the GMT leads to a global welfare improvement.

This paper investigates the global minimum tax (GMT) in a model of tax competition between asymmetric countries. We consider both profit shifting and real responses of multinational enterprises, and highlight the role of the substance-based income exclusion. The GMT reduces true tax rate differential and benefits the large country, while the revenue effect is ambiguous for the small country. In the short run where tax rates are fixed, the GMT reduces the small country’s revenue if profit shifting costs are low and increases it otherwise. In the long run where countries adjust tax rates, the minimum rate binds the small country only if it is low. With the rise of the GMT rate, countries set tax rates below the minimum to boost investments. A moderate GMT rate raise both countries’ revenues and large country’s welfare. It may reduce small country’s welfare if the welfare weight of private income is high.

The Global Minimum Tax (GMT), implemented in 2024, represents a significant change in the international tax system. This paper uses a difference-in-differences framework to assess its short-term impact, including on effective tax rates, investment and employment. Based on group-level Orbis data, the analysis finds that in the first year after the introduction of the GMT, relatively low-taxed MNEs experienced a statistically significant increase in their effective tax rates of 1.7 percentage points. However, this increase was not accompanied by a reduction in investment or employment. Heterogeneity analyses suggest that the effects on effective tax rates are driven by MNEs which were more likely to have engaged in tax planning and MNEs with higher profit-to-substance ratios. The point estimates in terms of ETRs suggest that the GMT resulted in an increase of EUR 79bn-109bn in tax revenue globally in the first implementation year, equivalent to 2.4-3.4% of global CIT revenue.

The OECD/G20 Base Erosion and Profit Shifting (BEPS) project represents the most ambitious attempt to curb multinational profit shifting through international coordination. Using firm-level country-by-country reporting data for 2300 large multinational groups between 2016 and 2023, we examine the impact of both BEPS and the anticipated effects of the global minimum tax. We document two main findings. First, BEPS coincided with only modest changes in multinational tax outcomes: effective tax rates in profit-shifting hubs increased slightly and reported economic substance—particularly employment—expanded, but the concentration of profits in low-tax affiliates remained largely unchanged. Second, simulations of the global minimum tax indicate a more substantial and targeted impact. Average effective tax rates increase by about 1.6 percentage points, with the largest effects concentrated in offshore investment hubs prone to profit shifting. We estimate additional global corporate tax revenues of roughly 100 billion.