The data continues to point to the existence of base erosion and profit shifting (BEPS), although there have been some modest signs of reduction in recent years, as the OECD pointed out in its annual report on corporate tax statistics, published on Thursday 11 July.
As a reminder, BEPS occurs when multinationals transfer their profits to places where tax is low or non-existent and where they have little or no economic activity, or when they erode tax bases through deductible payments such as interest or royalties (see EUROPE 13422/16). High-level indicators of potential BEPS activity have fallen in investment hubs compared to four years ago. These indicators include median earnings per employee, which fell by 13.1% compared to 2017, median profits per employee, which fell by 16.1%, and median related party revenues as a share of total revenues, which fell by 11.5%.
While these indicators may reflect a reduction in BEPS behaviour, the report notes that ‘public country-by-country reporting’ (CBCR) data for 2021 could also have been affected by the Covid-19 crisis. Furthermore, all of these indicators remain much higher in investment hubs than in other jurisdictions, indicating that BEPS activity is continuing.
However, corporation tax receipts continue to make a significant contribution to the economies of the jurisdictions, with modest increases on the previous year. In 2021, the share of corporate tax revenues in total tax revenues was 16% on average in the 123 jurisdictions, and the share of these revenues as a percentage of gross domestic product (GDP) was 3.2% on average.
These data indicate a continued stabilisation in corporate tax rates, following a long-term decline over the last two decades. However, these rates are still well below historical averages, falling from 28% in 2000 to 21.7% in 2019, and having since stabilised at 21.1%.
Read the report: https://aeur.eu/f/d0e (Original version in French by Anne Damiani)