A Firm Lower Bound: Characteristics and Impact of Corporate Minimum Taxation

Author/Editor:

Aqib Aslam ; Maria Delgado Coelho

Publication Date:

June 8, 2021

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper examines the role of minimum taxes and attempts to quantify their impact on economic activity. Minimum taxes can be effective at shoring up the corporate tax base and enhancing the perceived equity of the tax system, potentially motivating broader taxpayer compliance. Where political and administrative constraints prevent reforms to the standard corporate income tax, a minimum tax can help mitigate base erosion from excessive tax incentives and avoidance. Using a new panel dataset that catalogues changes in minimum tax regimes over time around the world, firm-level analysis suggests that the introduction or reform of a minimum tax is associated with an increase in the average effective tax rate of just over 1.5 percentage points with respect to turnover and of around 10 percent with respect to operating income. Minimum taxes based on modified corporate income lead to the largest increases in effective tax rates, followed by those based on assets and turnover.

Series:

Working Paper No. 1960/001

Subject:

Frequency:

regular

English

Publication Date:

June 8, 2021

ISBN/ISSN:

9781513561073/1018-5941

Stock No:

WPIEA2021161

Pages:

50

Please address any questions about this title to publications@imf.org