The data underlines the importance of the two-pillar plan being advanced by over 130 members of the OECD/G20 Inclusive Framework on BEPS to reform international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate.
The declining corporate tax rates across countries underlines the importance of a minimum global corporate tax rate, the OECD has noted.
New data released in the OECD’s annual Corporate Tax Statistics publication shows the importance of the corporate tax as a source of government revenues, while also pointing to evidence of continuing base erosion and profit shifting behaviours.
The data released today show that the corporate income tax is an important source of tax revenues for governments to fund essential public services, especially in developing and emerging market economies. On average, the corporate income tax accounts for a higher share of total taxes in Africa (19.2 percent) and in Latin America and the Caribbean (15.6 percent) than in OECD countries (10 percent).
The data also show that statutory corporate income tax rates have been decreasing in almost all countries over the last two decades. Across 111 jurisdictions, 94 had lower corporate income tax rates in 2021 compared with 2000, while 13 jurisdictions had the same tax rate, and only 4 had higher tax rates. The average combined (central and sub-central government) statutory corporate income tax rate for all covered jurisdictions declined from 20.2 percent in 2020 to 20.0 percent in 2021, compared to 28.3 percent in 2000.
“These declining rates highlight the importance of Pillar Two, which will put a multilaterally agreed limit on corporate tax competition,” the OECD noted.
According to the OECD, the data underlines the importance of the two-pillar plan being advanced by over 130 members of the OECD/G20 Inclusive Framework on BEPS to reform international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate.
Under the two-pillar solution to address the tax challenges arising from the digitalisation of the economy, Pillar One would re-allocate some taxing rights over multinational enterprises (MNEs) from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there. Pillar Two seeks to put a floor on competition over corporate income tax, through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases.
The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also regularly writes news stories about transfer pricing and international tax law. Alex is reachable at editor@transferpricingnews.com