Executive summary

On 21 November 2023, the OECD released the fifth edition of its annual Corporate Tax Statistics publication (the Corporate Tax Statistics report) together with an updated database. The OECD describes the database as intended to support the analysis of corporate taxation and base erosion and profit shifting (BEPS) activity covering more than 160 countries, including all OECD members.

The database includes anonymized and aggregated country-by-country (CbC) reporting statistics, reflecting information for the years 2019 - 2020 and including information from CbC reports filed in 52 jurisdictions. It is accompanied by a list of Frequently Asked Questions on the anonymized and aggregated CbC reporting data. The database also includes information on 61 intellectual property (IP) regimes in 46 jurisdictions and withholding tax rate statistics for 119 jurisdictions.

On the same date, the OECD released a working paper titled "Effective tax rates of MNEs: New evidence on global low-taxed profit," providing estimates of the distribution of effective tax rates (ETRs) of large MNEs across and within jurisdictions. In particular, the paper reflects a finding that high-tax jurisdictions account for more than half of global profits taxed at a rate below 15%.

Detailed discussion

Background

In October 2015, the OECD released the final reports on all 15 Action areas in its BEPS project.¹ The BEPS Action 11 report on Measuring and Monitoring BEPS, focused on estimating the scale of BEPS activity, identifying indicators of BEPS and providing recommendations for improving the measurement of BEPS.

In January 2019, the OECD released the first edition of the Corporate Tax Statistics database, which provided statistics and analysis covering approximately 100 countries on four main categories of data: (i) corporate tax revenues; (ii) statutory corporate income tax rates; (iii) corporate ETRs; and (iv) tax incentives related to innovation.² In July 2020, the OECD released the second edition of the database, including the first release of anonymized and aggregated data collected through CbC reports filed for 2016.³ The third and fourth editions of the database were released in July 2021 and November 2022, respectively.⁴

Corporate Tax Statistics: Fifth edition

The fifth edition of the Corporate Tax Statistics report and database compiles new data items and statistics from various existing data sets held by the OECD, with the aim of supporting the analysis of corporate taxation in general and BEPS activity in particular. The OECD press release describes the new data and estimates on taxation of large MNE profits as showing how tax incentives and other concessions in jurisdictions with high statutory and average tax rates enable some companies to pay low ETRs, indicating that this highlights "how the introduction of a global minimum tax rates on the profits of large MNEs agreed by the OECD/G20 Inclusive Framework would create new opportunities for domestic resource mobilisation" by both high-tax and low-tax jurisdictions. The press release also states that the report shows "continued misalignment of MNE profits and real economic activity in markets worldwide."

The fifth edition of the Corporate Tax Statistics database contains the following categories of data:

• Corporate tax revenues
• Statutory corporate income tax rates
• Corporate ETRs
• Tax incentives for research and development (R&D)
• Implementation of CbC reporting under BEPS Action 13
• Anonymized and aggregated statistics collected via CbC reports
• IP regimes
• Standard withholding tax rates
• Bilateral tax treaties

Corporate tax revenues

The database includes information on 120 jurisdictions from 1965 - 2020 (for OECD member countries) and 1990 - 2020 (for non-OECD member jurisdictions). In 2020, the share of corporate tax revenues in total tax revenues was 15.1% on average, and the share of these revenues as a percentage of GDP was 3.0% on average.

According to the report, the size of corporate tax revenues relative to total tax revenues and relative to GDP varies by groupings of jurisdictions. On average, corporate income tax accounts for a higher share of total taxes in Africa (19.3%), Asia and the Pacific (18.9%) and Latin America and the Caribbean (15.6%) than in OECD member countries (9%). In 15 jurisdictions, corporate tax revenues made up more than one-quarter of total tax revenues in 2020.

Statutory corporate income tax rates

The database covers 141 Inclusive Framework member jurisdictions from 2000 - 2023. The report indicates that statutory corporate income tax rates have remained stable in the period between 2021 and 2023, which follows a decline over the last two decades and rates remain below historic averages. The average combined (central and sub-central government) statutory corporate tax rate for the 141 Inclusive Framework jurisdictions covered was 21.1% in 2022, as compared to 28.1% in 2000.

Of the 141 jurisdictions covered, in 2023 27 had corporate tax rates equal to or above 30%, two had corporate tax rates less than 10%, and 12 had no corporate tax regime or a corporate tax rate of zero. Further, the number of jurisdictions with rates of less than 10% remained stable between 2000 and 2023, with 16 in 2000 and 14 in 2023.

Corporate effective tax rates

The database covers 89 jurisdictions for 2017 - 2022. It contains four forward-looking ETR indicators, calculated using information about specific tax rules and focusing on the effects of tax depreciation rules and related provisions (e.g., allowances for corporate equity, half-year conventions, inventory valuation methods) as of 1 July for the years 2017 - 2022: (i) the effective average tax rate (EATR); (ii) the effective marginal tax rate (EMTR); (iii) the cost of capital; and (iv) the net present value of capital allowances as a share of the initial investment. These indicators do not incorporate any information about firms' actual tax payments.

The report notes that the average EATR across jurisdictions (20.2%) is 1.3 percentage points lower than the average statutory tax rate (21.5%). Of the 89 jurisdictions covered, in 2022 76 allowed accelerated depreciation, meaning that investments in these jurisdictions were subject to EATRs below the statutory tax rates, and eight had an allowance for corporate equity (ACE) that further reduced their EATRs.

Tax incentives for R&D

The database includes two sets of R&D tax incentives indicators on the extent of R&D tax support provided through expenditure-based R&D tax incentives. The first set of indicators reflects the cost to the government of expenditure-based tax incentives, and the second set of indicators are intended to capture the effect on firms' investment costs of expenditure-based R&D tax incentives. The first set of indicators covers 49 jurisdictions and the second covers 48, both for the period 2000 - 2022.

The report states that R&D tax incentives are increasingly being used to promote business R&D, with 33 out of the 38 OECD member countries providing tax relief with respect to R&D expenditures in 2021 compared to 19 in 2000. It further indicates that most jurisdictions use some combination of direct support and tax relief with the respect to business R&D. In 2022, 21 OECD member countries provided refundable tax credits or equivalent incentives. The report also indicates that R&D tax incentives have become more generous on average over time, noting the higher uptake and increased generosity of R&D tax relief provisions.

Action 13 implementation and anonymized and aggregated CbC reporting data

The database includes anonymized and aggregated CbC reporting data for two years (financial years 2019 and 2020). Although 93 jurisdictions required mandatory filing of CbC reports for 2020, only 52 jurisdictions were considered to have received a sufficient number of CbC reports to be able to provide aggregated statistics while ensuring taxpayer confidentiality, with the data covering almost 7,000 MNEs.

The report states that the latest CbC reporting data shows evidence of misalignment between the location where profits are reported and the location where economic activities occur, with revenues and profits per employee tending to be higher in investment hubs. The report notes that the share of related-party revenues in total revenues is higher in the grouping of investment hub jurisdictions (30%) than in the groupings of high-income jurisdictions (18%) and middle- or low-income jurisdictions (13%).

The report notes that the aggregated CbC reporting data is subject to limitations that need to be kept in mind when using it for any economic or statistical analysis. According to the report, some of the limitations have already been addressed through revised guidance on CbC reporting implementation. For example, with respect to the double-counting of dividends, the guidance was updated in November 2019 to specify that intra-company dividends should be excluded from profit figure. However, it is expected to take several years before these updates lead to improvements in data quality. The report indicates that the OECD continues to work with members of the Inclusive Framework and other stakeholders to improve the quality and consistency of the data across jurisdictions. The report further notes that, even with additional years of data, economic and other events affecting the data may make it difficult to identify the effect of BEPS-related policies.

IP regimes

The database includes information on regimes that narrowly target IP income and regimes that offer reduced rates for IP income and other types of income. Of the 61 IP regimes covered in the database for 46 jurisdictions, 43 regimes were found to be not harmful upon review by the OECD Forum on Harmful Tax Practices, including 26 that were found to be not harmful after having been amended to align with the Action 5 minimum standard. One regime was found to be harmful, and the remainder (i) were abolished, (ii) are in the process of being amended or eliminated or (iii) are under review.

The database groups IP regimes into three main categories based on qualifying assets: regimes covering patents, regimes covering software and regimes restricted to small and medium enterprises (SMEs). Of the 43 non-harmful IP regimes, all 43 offer benefits on patents, 32 offer benefits on copyrighted software and 19 offer benefits restricted to SMEs on other IP assets. Tax rate reductions for the 43 non-harmful IP regimes range from a full exemption from tax to a reduction of about 40% of the standard tax rate, with the most common reduction being 50%.

Withholding tax rates

The data includes withholding tax rate statistics for 119 jurisdictions. The report states that withholding tax data can potentially provide insights into certain BEPS strategies, such as treaty shopping or the strategic location of debt and intangible assets.

The report indicates that high-income jurisdictions have an average standard withholding tax rate on dividends of 15.5%, compared to 11.2% in middle- or low-income jurisdictions and 5.2% in investment hub jurisdictions. For interest payments, the average standard withholding tax rate in high-income jurisdictions is 11.8%, compared to 15.9% in middle- and low-income jurisdictions and 4.8% in investment hub jurisdictions. Royalty payments are subject to an average standard withholding tax rate of 15.6% in high-income jurisdictions, compared to 16.6% in middle- and low-income jurisdictions and 3.6% in investment hub jurisdictions.

The report states that bilateral tax conventions can play a crucial role in encouraging and fostering economic ties between countries, including through the limitations on withholding taxes that may be applied to specified categories of income. Although the number of treaties across the 131 jurisdictions covered in the database has increased considerably between 1990 to 2023 (from 1,000 to almost 4,500), there has been a slowdown in recent years with only 36 additional treaties being concluded in the period 2017 - 2023.

"Effective tax rates of MNEs: New evidence on global low-taxed profit" working paper

The working paper estimates average backward-looking ETRs for a set of 222 jurisdictions, primarily based on anonymized and aggregated CbC reporting data from 2017 to 2020.

According to the paper's estimates, median ETRs in high-income jurisdictions (16.3%) and upper-middle income jurisdictions (15.1%) are lower than in lower-middle income jurisdictions (20.7%) and low-income jurisdictions (21.7%). The estimates show a median ETR in investment hub jurisdictions of 1.6%.

The paper states that some jurisdictions with high estimated average tax rates subject considerable shares of profit to tax at low rates, creating low-taxed profit in high-tax jurisdictions. The paper also notes that there are significant differences between ETRs and statutory tax rates in many jurisdictions, with the ETR on average 6.9 percentage points lower than the statutory tax rate in the same jurisdiction.

Implications

The Corporate Tax Statistics in general, and the aggregated CbC reporting data in particular, represent a source of information for analyzing the taxation of MNEs, but the data contains some significant limitations that should be considered in using the information.

Companies may want to review the Corporate Tax Statistics report and database and consider the implications of the OECD's interpretations of the data, which may provide some signals regarding the future direction of tax policy proposals.

Endnotes

¹ See EY Global Tax Alert, OECD releases final reports on BEPS Action Plan, dated 6 October 2015.

² See EY Global Tax Alert, The Latest on BEPS, dated 28 January 2019.

³ See EY Global Tax Alert, OECD releases new corporate tax statistics including anonymized and aggregated country-by-country report statistics, dated 15 July 2020.

⁴ See EY Global Tax Alerts, OECD releases corporate tax statistics publication (third edition), including anonymized and aggregated Country-by-Country report statistics, dated 11 August 2021, and OECD releases corporate tax statistics and the 2022 revenue statistics and consumption tax trends, dated 7 December 2022.