Research

This paper presents first-round simulations of the tax revenues arising from the Pillar One Amount A proposal of the G20/OECD inclusive framework on base erosion and profit shifting for 2016–2025. Amount A aims at revising taxing rights on multinational enterprises with at least €20 billion in revenue and profitability above 10%. We consider the latest available Pillar One Amount A rules as detailed in the “Multilateral Convention to Implement Amount A of Pillar One” (OECD 2023b). In a first step, we identify the multinationals that would be “covered” under Pillar One Amount A. 

This paper explores profit shifting behaviour by European banks through a newly available data source. Financial institutions as of 2014 started disclosing their activity on a country-bycountry level following the CRD IV EU Directive. 

The country-by-country reporting (CbCR) requires European banks to file their revenues, profits, number of employees and taxes paid in all countries where they operate including tax haven countries. In this paper, I construct the database for bank CbCR from the banks filings and annual reports. The database includes 54 European banks headquartered in 18 different European countries between 2014 and 2022. 

I use the database to study profit shifting arising from international tax differences between countries. I find that the banks’ profits are sensitive to the tax rate suggesting that banks lower their tax burden through their affiliates. The size of banks seems to have an effect, the larger the bank group, the more it might engage in tax planning. Profit shifting is estimated by using the tax differential methodology. 

The findings show that profit shifting by the top European banks is around EUR 6 billion. This implies tax revenue losses of up to 4%. The introduction of a global minimum tax of 15% would generate between 300 to 2 billion euros depending on the final rules implemented.