Policy

EU-Wide Unitary Taxation: A Path to a Fair Corporate Tax System

Presented at IIPF 2024

EU-wide unitary taxation would raise US$24.1–26.8 billion in isolation, more when combined with a minimum corporate tax.

Paper (SSRN)

Abstract

This paper examines the most direct method to curb European profit shifting: an EU-wide adoption of unitary taxation. Using country-by-country reporting data, we estimate country-level revenue changes when taxable profits are distributed based on different formulas measuring economic activity. We find that tax revenues would increase for most EU members. While some countries – in particular the Netherlands, Luxembourg, Ireland, and Malta – may incur losses, these can be offset by adopting an effective national top-up tax, consistent with the EU’s plan to introduce a minimum corporate tax of 15%. Our findings indicate that unitary taxation would not only restore fair competition and significantly boost EU-wide tax revenues — ranging from US$24.1 to US$26.8 billion in isolation or US$34.5 to US$35.4 billion when combined with the minimum tax — but is also politically feasible: when coupled with the minimum corporate tax, no member state would lose from its implementation.

Taxing Extreme Wealth: What Countries Around the World Could Gain from Progressive Wealth Taxes

Presented at Paris School of Economics

Using data from the World Inequality Database, we estimate the revenue potential of a moderate, progressive net wealth tax for 173 countries, calibrated on Spain's "solidarity surcharge." We find that such a tax could raise approximately US$1.9 trillion globally — on average, a 6.1% increase in government budgets.

Paper (PDF)

Abstract

In light of the global challenges of climate change, the cost of living crisis, high debt levels, and the risk of authoritarian rule, countries need stable and reliable revenue sources that do not harm their economies and societies. A moderate, progressive tax on net wealth is a tool to generate this revenue. Taxing extreme wealth not only addresses the problem of the regressivity of the income tax system for the ultra-rich but also reduces overlapping inequalities and ensures that those who have contributed the most to the planet’s destruction pay their fair share. This paper presents country-level estimates for 173 countries on the revenue potential from implementing a moderate, progressive tax on net wealth. We draw on the example of Spain’s “solidarity surcharge,” a model that has proven politically feasible, and use data from the World Inequality Database to project the revenues of adopting similar tax measures around the world. Our analysis indicates that such a tax could lead to an average budget increase of 6.1%. This equates to a potential global revenue of approximately US$1.9 trillion, which is over four times the investment required for countries to collectively adapt to climate change.