News · Brookings AI
Corporate tax responsiveness varies across countries—and that heterogeneity matters for global coordination
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The OECD/G20 global minimum tax, for example, establishes a common statutory floor intended to limit profit shifting and reduce harmful tax competition.
Key facts
- Suppose an economy has $10 trillion in corporate taxable income and a statutory rate of 21%, generating $2.1 trillion in revenue
- At a 21% rate, a 1% increase in the net-of-tax rate corresponds to a 0.79 percentage point reduction in the statutory rate
- Assumptions: $10 trillion in taxable income, 21% statutory rate
- In all, the research team included 26 researchers with access to data from 16 different countries
Summary
Identical tax rates don’t produce identical outcomes across countries due to differences in how firms respond to tax incentives. Corporate tax responsiveness varies widely, with elasticities ranging from near zero to almost two across the 16 countries studied. Elasticities can be predicted using observable indicators, giving policymakers a practical tool even without administrative tax data. Corporate tax policy is increasingly shaped by multilateral coordination. Using administrative corporate tax return data from 16 countries and a unified analytic framework, they estimate the corporate elasticity of taxable income —the measure of how strongly reported income responds to tax incentives.