Effective tax rates of MNEs and the global distribution of low-taxed profit

Abstract The debate on the taxation of corporate profits is often focused on the extent of low-taxed profit of multinational enterprises (MNEs) in jurisdictions with low statutory or average effective tax rates. However, some affiliates in high tax jurisdictions may also be subject to low effective rates due to tax incentives or other provisions. To date, a global accounting of the effective tax rates paid by MNEs that incorporates within-country heterogeneity has been missing. Using a new dataset on the global activities of large MNEs, this paper provides estimates of the distribution of effective tax rates and the low-taxed profit of large MNEs between and within a broad set of jurisdictions. Our analysis shows substantial heterogeneity in the effective taxation of MNEs, even within jurisdictions. We find that low-taxed profit is common in many jurisdictions, and that more than half of total global low-tax profit is reported in high tax jurisdictions.