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.
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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.