Miroslav Palanský

We develop a methodology to decompose the tax revenue impact of the global minimum tax introduced in 2024 into several components and quantify its potential impact on profit shifting. We apply the methodology to a dataset comprising 34 thousand country-multinational observations combined from corporate tax returns, financial statements, and global country-by-country reports of all multinationals active in Slovakia in 2020. We find that the global minimum tax has the potential to decrease profit shifting by most multinationals, which are on average likely to pay higher effective tax rates in most countries worldwide post-reform. We find that Slovak corporate tax revenues will increase by 4%, with half of the increase due to its minimum top-up taxes. The other half of the increase is corporate income tax on profits that will no longer be shifted out of the country. We expect the global minimum tax to target 49% of previously shifted profits.

Using matched tender-level public procurement and firm-level ownership data, we document how frequently public procurement suppliers have ownership links to jurisdictions commonly described as tax havens or secrecy jurisdictions. We find that around 5.5% of tenders by value—equivalent to €145 billion annually, nearly the size of the EU’s entire budget—are awarded to firms with ownership links to jurisdictions black- or grey-listed by the EU. The reliance on tax‑haven‑linked suppliers varies widely across member states; in some countries the share exceeds 10%, and for certain havens, such as the British Virgin Islands and Bermuda, the value of tender awards linked to them are worth over 900 per cent of their GDP. We provide descriptive evidence on which jurisdictions appear most frequently in supplier ownership chains and how these patterns relate to standard tax-haven indicators such as effective corporate tax rates and secrecy scores. We also show that tenders co-financed by EU funds and those attracting more bidders are less likely to be won by firms linked to tax havens.

Since 2016, multinationals with a revenue over € 750 million have to submit country-by-country reports to tax authorities to deter tax avoidance. Using a regression discontinuity design, we provide evidence for an increase in affected multinationals’ effective tax rates. However, the most aggressive multinationals with known tax haven presence were only moderately affected. The effect is mainly driven by medium-aggressive firms, which achieved low effective tax rates without tax haven affiliates to shift profits to. The policy was thus effective in combating some tax avoidance but profit shifting to tax havens remains an issue, explaining the push for further policy measures including the global minimum corporate tax rate.