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EU tax gap: impact of minimum tax rate

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The European Tax Observatory has published its first report Closing the tax gap for multinational enterprises: simulations for the European Union. The report estimates the amount of tax revenue that the European Union could raise if it were to impose a minimum tax on the profits of multinational companies.

The study considers several scenarios for the imposition of such a tax ranging from an international tax agreement to unilateral measures and a range of rates. An international agreement on a minimum rate of 25% would allow the European Union to increase its tax revenues by €170bn in 2021, an increase of 50% of the corporate tax revenue collected in 2020. With a minimum rate of 15%, the additional tax revenue would amount to about €50bn.

An EU country that unilaterally chose to subject its multinationals to a minimum rate of 25% and taxed part of the tax deficit of non-resident companies accessing its market would increase its corporate tax revenues by around 70%, according to the report.

The European Commission had recently announced the launch of the European Tax Observatory. Funded by the EU, but operating independently in its research work, the Tax Observatory’s aims are to support the ‘fight against tax abuse through cutting-edge research’.