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Where Corporate Taxes Are Set to Rise for Multinationals

This article is published in collaboration with Statista 

by Katharina Buchholz

On January 1, a new global minimum corporate tax of 15 percent on multinational corporations went live across some European and Asian countries. The following years will likely see more nations - including some that have been known as tax havens - join the initiative spearheaded by the OECD and the G20. It is seeking to collect billions of dollars every year on company profits that have so far been taxed at often much lower levels and to rein in what the organizations call base erosion and profit shifting (BEPS), basically the ability of large multinationals to pay negligible amounts of taxes by using global corporate structures and favorable offshore tax regimes.

The below graphic shows the effects on corporate tax in jurisdictions that have adopted or are in the process of adopting these new corporate tax laws and so far had effective average taxes rates lower than 15 percent. While the changes in corporate tax law in these places might be especially stark, research by the OECD has found that low-taxed corporate profits exist in places known for low taxes as well as in countries with high overall corporate tax, as these do habitually carve out exceptions for some large corporations. A paper by the organization has found that more than half of multinationals' profits taxed at below 15 percent were created in countries considered high tax jurisdictions, where statutory and effective average corporate tax rates already exceed that threshold.

Among low tax countries, the Bahamas as well as the self-governing British Crown dependencies Guernsey, Jersey and the Isle of Man are currently working on implementing new laws - despite being in earlier stages of the process still. Orbitax, which maintains a tracker of country implementation, said the changes announced by the Bahamas' Attorney General would constitute "a seismic shift" in the country's tax system. All four jurisdictions are considered tax havens following a popular definition and have been confirmed by the OECD to levy effective average corporate taxes of 0 percent. However, additional tax havens with a 0 percent effective tax - like the Cayman Islands, the British Virgin Islands and the Turks and Caicos Islands - have signed onto the initiative, but are among the laggards in the process.

Corporate tax rates for multinationals are also rising in Andorra even though the European micro nation said it wasn't home to many companies with annual revenues over 750 million Euros or their dependencies, to whom the law applies - highlighting how tax havens do differ from one another. The dataset also shows that out of annual average multinational profits of $5.9 trillion assessed over four years in nations taking part in the BEPS initiative, $750 billion were taxed below 5 percent and $1.39 trillion were taxed at between 5 percent and 15 percent.

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