On 17 November 2022 the OECD published the latest edition of the annual Corporate Tax Statistics publication, covering over 160 countries and jurisdictions. The latest edition includes new aggregated data on country-by-country (CbC) reports covering the activities of almost 7,000 multinational enterprises.
The data contained in the latest edition indicate that base erosion and profit shifting (BEPS) risks are continuing and support the need to implement the two-pillar international tax solution to ensure that large multinational enterprises are paying the appropriate tax in the countries where they operate and earn profits.
The new data from CbC reports demonstrates that the median value of revenues per employee in jurisdictions with a 0% rate of corporate income tax is USD 2 million while the revenues per employee are only USD 300,000 in jurisdictions with a corporate income tax rate above zero. In jurisdictions considered to be investment hubs, related party revenues make up 35% of total revenues, compared to an average share of related party revenues in high, middle and low income jurisdictions of around 15%. This indicates that base erosion and profit shifting may be occurring, although there could also be commercial reasons for this effect.
Corporate income tax is still an important source of revenue for most countries, and in particular for developing countries. The corporate income tax brings in on average a higher share of total tax revenue in Africa (18.8%), Asia and the Pacific (18.2%) and Latin America and the Caribbean (15.8%) compared to OECD countries where the corporate income tax only raises 9.6% of total tax revenue.
The new data point to a stabilisation of CIT rates in 2022, following a trend to reduce the rates in recent decades, with countries looking for the correct balance between revenue raising measures and incentives for investment. Countries are facing a need to raise tax revenue to achieve fiscal stability following the support provided for households and business in the pandemic. They also need to grow their economies and they are therefore considering tax and other incentives for key industries and activities. The combined (central and sub-national government) statutory tax rate for the countries surveyed was 20% on average in 2022, the same as in 2021.
There are indications that governments have used the corporate income tax system to incentivise investment, especially in research and development (R&D), in an effort to increase economic growth. Corporate tax bases have narrowed, as more generous capital allowances have been introduced, and R&D tax provisions have become more generous in 2020 and 2021 in a number of OECD countries and EU member states.
The publication also looks at intellectual property regimes, charting the lower rates offered by countries within these regimes and comparing them with the headline corporate income tax rate in those jurisdictions. The report notes that the reduction to the headline rate differs from one country to another. In some countries different tax rates are offered within these IP regimes depending on the type of income or the size of the company.