An interesting study was released by the OECD. It concerns which countries multinationals prefer to be taxed in. And they are not necessarily the so-called “tax havens”.

According to the OECD study, multinationals make half of their low-tax profits, not in countries that are famous for their favorable taxation (tax havens), but in those that announce theoretically high rates of taxation.

And these are not suspicious tax arrangements, but political measures such as research tax breaks or various tax advantages; which are offered to businesses to attract their investment.

“Many jurisdictions that are typically considered to have increased taxation offer various incentives that can lead to significantly reduced taxation,” explains the Organization for Economic Co-operation and Development.

Around the world, about $2.140 trillion of multinational profits are taxed each year at rates below 15%. From this amount, the 53%, located in countries or territories whose average or theoretical rate of taxation is above 15%. That is, these countries offer discounts on a part of the realized profits. Even more remarkable is the fact that the 10% of profits that are taxed at less than 5% are found in countries reporting tax rates of 15% or higher.

Countries with high official tax rates (above 15%) do not always apply them: more than a quarter of profits are actually taxed there at rates below 15%. But the opposite is rarely true: in countries that announce tax rates below 5%, “almost all” of profits are taxed at this effective rate.

In total, on annual profits of $5.900 trillion, 13% are taxed at less than 5% and 23% at rates between 5% and 15%. Most of the profits of multinational companies are taxed at rates between 15% and 30%.

It is, according to the OECD, one of the first such precise analyzes of actual taxation by country, which is expected to bring changes to the debate that has traditionally pitted low-tax countries against those with higher tax rates. If actual rates are not taken into account, “there may be erroneous estimates of the impact of various international reforms”, such as minimum corporate taxation, the OECD notes.

The global amount of profits taxed at low rates can also be “clearly underrated” from a portion of today’s analyses, the study points out.

The study focuses on multinational companies whose turnover exceeds 750 million euros and based on data from 2017 to 2020.

Moreover, the OECD notes that “the place where profits are declared and the place where economic activities are carried out continue to differ”, which “underlines the importance of implementing an international tax agreement”.

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