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

June 8, 2021

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Aqib Aslam, and Maria Delgado Coelho. A Firm Lower Bound: Characteristics and Impact of Corporate Minimum Taxation, (USA: International Monetary Fund, 2021) accessed September 19, 2024

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.

Subject: Average effective tax rate, Corporate income tax, Effective tax rate, Income, Income tax systems, National accounts, Tax policy, Taxes

Keywords: Average effective tax rate, Corporate income tax, Effective tax rate, Firm Lower Bound, Global, Income, Income tax systems, Level data, Minimum tax, MT reform, Profit margins

Publication Details

Pages:

50
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/161
Stock No:

WPIEA2021161
ISBN:

9781513561073
ISSN:

1018-5941

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