Half of the profits of low-tax multinationals are not in countries known for their advantageous taxation, but in those which have theoretically high rates, according to a study published Tuesday by the OECD.
The cause is not questionable tax arrangements but political measures, such as research tax credits or various tax advantages, granted to companies to attract their investments.
Many jurisdictions typically considered to have high taxes offer various incentives that can lead to significantly reduced tax rates, explains the Organization for Economic Co-operation and Development (OECD).
Worldwide, some $2.14 billion of multinational profits are taxed at rates of less than 15% each year. Of this sum, more than half, 53% precisely, is located in countries or territories whose average or theoretical tax rate is higher than 15%. This means that these countries grant significant discounts on part of the profits made.
Even more notable, 10% of profits taxed less than 5% are located in countries with rates of 15% or more.
Countries with high official tax rates (more than 15%) do not always apply them: more than a quarter of profits are actually taxed at less than 15%. But the opposite is rarely true: in countries with rates of less than 5%, almost all profits are taxed at this real rate.
In total, out of 5.900 billion annual profits, 13% are taxed less than 5% and 23% between 5% and 15%. The majority of profits of multinational companies are taxed between 15% and 30%.
According to the OECD, this is one of the first such precise analyzes of effective taxation by country, which should nuance the debate traditionally pitting low-tax countries against those with high rates. Failing to consider effective rates can lead to false estimates of the impact of various international reforms, such as minimum corporate taxation, notes the OECD.
The global sum of low-taxed profits could also be significantly underestimated by some of the current analyses, notes the report.
The study focuses on multinational companies with turnover exceeding 750 million euros and is based on data from 2017 to 2020.
Furthermore, the OECD notes that there is still a gap between where profits are declared and where economic activities are carried out, which highlights the importance of implementing an international tax agreement.