Journal article
The impact of the global minimum tax on incentives for business location, investment and profit shifting
- Abstract:
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In 2021, over 140 countries agreed to what is widely considered to be the most significant reform of international business taxes in a century: the introduction of a global minimum tax (GMT) at a rate of 15% on the profits of large MNEs. We study the reform’s impact on three interrelated MNE decisions: the location of investment, the size of investment conditional on location, and the extent to which profit is shifted to a low-tax country. We extend existing models of the impact of taxation on investment incentives to allow for profit shifting and the GMT. We also develop and quantify a measure of the economic cost of tax-induced distortions to location. We apply our model to taxes in 34 OECD countries. Raising the GMT rate reduces profit shifting as the benefits of profit shifting are reduced. This raises the MNE’s tax liability and its cost of capital, reducing its aggregate investment. The impact on location choice is more subtle, as the dispersion in effective tax rates across countries first rises, then falls, as the GMT rate rises. At a GMT rate of 15%, we estimate that there is a small rise in the dispersion, implying greater distortions to location decisions.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
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- Files:
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(Preview, Version of record, pdf, 2.4MB, Terms of use)
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- Publisher copy:
- 10.1057/s41267-026-00860-z
Authors
- Publisher:
- Springer
- Journal:
- Journal of International Business Studies More from this journal
- Publication date:
- 2026-05-13
- Acceptance date:
- 2026-01-27
- DOI:
- EISSN:
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1478-6990
- ISSN:
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0047-2506
- Language:
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English
- Keywords:
- Pubs id:
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2367200
- Local pid:
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pubs:2367200
- Deposit date:
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2026-02-04
- ARK identifier:
Terms of use
- Copyright holder:
- Bares et al.
- Copyright date:
- 2026
- Rights statement:
- Copyright © 2026, The Author(s). This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.
- Licence:
- CC Attribution (CC BY)
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