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While public officials argue and delay adopting global tax reforms, multinational companies continue to rort the variances in rates and arbitrage jurisdictions. More than US$2.4 tln of profits avoid minimum acceptable levels

Business / analysis
While public officials argue and delay adopting global tax reforms, multinational companies continue to rort the variances in rates and arbitrage jurisdictions. More than US$2.4 tln of profits avoid minimum acceptable levels
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The OECD released its 2023 Corporate Tax Statistics today (Wednesday NZT).

It's urging faster action for global tax reform, because multinational companies continue to report low-taxed profit even in jurisdictions with high corporate tax rates. More than a third of the US$6.5 trillion of global company profits are taxed at rates less than 15%.

Ireland, a favourite jurisdiction for tax-avoiding multinationals, is the worst offender.

But even in countries with higher statutory rates, local incentives and concessions can cut tax bills sharply, and the OECD is calling for the adoption of a global minimum of a 15% rate.

Here an extract of the top-level company tax rates for jurisdictions we often compare ourselves with.

  Combined corporate
income tax rate
from NZ
  % %
Australia 30.0 +2.0
Canada 26.2 -1.8
China (PRC) 25.0 -3.0
Denmark 22.0 -6.0
France 25.8 -2.2
Germany 29.9 +1.9
Hong Kong 16.5 -11.5
Ireland 12.5 -15.5
Japan 29.7 +1.7
New Zealand 28.0  
Norway 22.0 -6.0
Singapore 17.0 -11.0
Sweden 20.6 -7.4
Switzerland 19.7 -8.3
UK 25.0 -3.0
USA 25.8 -2.2

Here is the OECD note covering the data release.

Jurisdictions with high tax rates account for more than half of the low-taxed profits reported globally by multinational enterprises (MNEs), according to new OECD analysis.

The new data and estimates on taxation of large MNE profits show how tax incentives and other concessions in jurisdictions with high statutory and average tax rates enable some firms to pay low effective tax rates (ETRs). The findings highlight how the introduction of a global minimum tax rate on the profits of large MNEs agreed by the OECD/G20 Inclusive Framework would create new opportunities for domestic resource mobilisation for high-tax and low-jurisdictions alike.

The OECD’s latest Corporate Tax Statistics report and a new accompanying working paper, Effective Tax Rates of MNEs: New evidence on global low-taxed profit, provide new data on global low-taxed profit, a key issue for determining the impact of the global minimum tax.

The working paper finds that an estimated 37.1% (USD 2 411 billion) of global net profits (totalling USD 6 503 billion) are taxed at ETRs below 15%. In contrast to earlier studies, which have focused on low-taxed profit only in low-tax jurisdictions, the new paper estimates that high-tax jurisdictions – jurisdictions with statutory and average tax rates above 15% – account for more than half (56.8%) of all global profits currently taxed below 15%. This profit in high-tax jurisdictions exists across all country groups regardless of income level, with an estimated 28% of all global low-taxed profit being located in low or middle-income jurisdictions.

High-tax jurisdictions even account for more than 20% of very low-taxed profits – those with an ETR below 5%. These low-taxed profits in jurisdictions with high tax rates, which are likely the result of tax incentives and other targeted concessions, highlight the revenue-raising potential of the global minimum tax, even in jurisdictions that have previously been thought to be high-tax.

The data in Corporate Tax Statistics covers MNE taxation in more than 160 countries and jurisdictions, bringing together new detailed information on MNEs’ international activities, as well as two years of aggregated Country-by-Country Reporting (CbCR) data shared between companies and tax authorities.

The report shows continued misalignment of MNE profits and real economic activity in markets worldwide. The median value of MNE revenues per employee in investment hubs is USD 1 710 000, as compared to USD 290 000 for all other jurisdictions. While these effects could reflect some commercial considerations, they likely also indicate the existence of base erosion and profit shifting (BEPS) practices, further highlighting the importance of implementing the global tax agreement.

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This article doesn't have a single mention of the lack of imputation systems. If governments, particularly the US are going to continue to bury their heads in the sand and expect people to accept company profits being taxed firstly in the company and then a second time by the stockholder when a dividend is declared, then profit shifting is going to continue. 

But what winds me up the most is that governments are allowed to meet and set minimum prices (i.e. taxes), while if anybody else does it, it's cartel behaviour and it's illegal.

In essence, Ireland is Costco, competing on price and all the other countries are the the Foodstuffs and Progressives of this world. They're meeting and saying lets all set the price of milk to be minimum $3 a litre, and are getting angry at Ireland for charging $2 a litre. (In case the metaphor isn't clear, milk is corporate tax and the cost to 15%).


As a UK friend of mine said, "No sh!t, Sherlock."

He is a member of the "Harvard Mafia" - a nickname given Harvard law school graduates that all end up in senior investment banking circles where they advise their clients on how to minimise the tax they pay - amongst other things. 


Westminster Doctrine: “every man is entitled, if he can, to arrange his affairs so that the tax attaching so that the tax attaching under the appropriate Acts is less than it otherwise would be”. Justice Tomlin, IRC v Duke of Westminster.