IMF Working Papers

Efficient Economic Rent Taxation under a Global Minimum Corporate Tax

By Shafik Hebous, Andualem Mengistu

March 15, 2024

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Shafik Hebous, and Andualem Mengistu. Efficient Economic Rent Taxation under a Global Minimum Corporate Tax, (USA: International Monetary Fund, 2024) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The international agreement on a corporate minimum tax is a milestone in global corporate tax arrangements. The minimum tax disturbs the equivalence between otherwise equivalent forms of efficient economic rent taxation: cash-flow tax and allowance for corporate equity. The marginal effective tax rate initially declines as the statutory tax rate rises, reaching zero where the minimum tax is inapplicable, and increases thereafter. This kink occurs at a lower statutory rate under cash-flow taxation. We relax the assumption of full loss offset; provide a routine for computing effective rates under different designs; and discuss policy implications of the minimum tax.

Subject: Allowance for corporate equity, Average effective tax rate, Cash-flow tax, Corporate income tax, Marginal effective tax rate, Tax policy, Taxes

Keywords: ACE, Allowance for corporate equity, Average effective tax rate, Cash-flow tax, Corporate income tax, Corporate Tax Reform, Depreciation rate, Effective Tax Rate, Global, International Taxation, Investment, Marginal effective tax rate, Minimum tax, Minimum Taxation, Policy implication, Rent Tax, Top-up tax

Publication Details

  • Pages:

    41

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2024/057

  • Stock No:

    WPIEA2024057

  • ISBN:

    9798400271014

  • ISSN:

    1018-5941

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