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Global Documents

Business Location Decisions with a 
Global Minimum Tax
Michael P. Devereux
Oxford University Centre for Business Taxation 
and European Tax Policy Forum
with Francois Bares and İrem Güçeri
Key issues
What will happen to firm location decisions (and profit 
shifting) if Pillar 2 introduced and works as intended? 
Global optimum: taxes should distort location decisions 
as little as possible
Capital export neutrality (CEN)
Will a global minimum tax move system towards CEN? 
A reduction in dispersion of effective average tax rates?
Would also tend to reduce tax competition 
Need to take profit shifting into account
The (simple) model:
Parent chooses between countries (eg. A or B) for real investment, 
while shifting some profit to a zero-rate jurisdiction (X)
Choice depends on EATR + costs (EEATR)
PARENT
A
X
B
Example: France
4
France v Ireland: effective tax rates 
5
OECD effective tax rates 
6
OECD averages
7
OECD: dispersion of EATRs
8
Conclusions
If Pillar 2 works as intended, dispersion of EATRs 
depend son the threshold:
At 15%, dispersion is largely unaffected
So economic efficiency of location decisions also 
largely unaffected
Of course: 
The cost of capital rises, so negative impact on 
investment overall 
Profit shifting falls


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