Fair Corporation Tax

👉🏽 This story is developed as part of the Doughnut Economics for Policymakers guide.

Fairer taxation of multinational corporations can mobilise substantial public revenues, reduce competitive disadvantage for compliant businesses, and strengthen the integrity of tax systems worldwide. Governments can coordinate on globally agreed minimum tax rates, extend taxing rights to where economic activity actually occurs, and increase corporate financial transparency through both national legislation and international collaboration. 

Overview

Each year close to 40% of multinational profits ( $1 trillion in 2019) are shifted to low-tax jurisdictions — not where their customers, workers, or suppliers are. Global average corporate rate declined from 39% in 1980 to 22% in 2022 as governments competed to attract big business. This "race to the bottom" has starved public finances of revenues needed for healthcare, education, and the transition to regenerative economies, while businesses that cannot or will not engage in tax avoidance are left at a competitive disadvantage.

Important interlinked policy approaches that have been discussed or put in action to address these issues include: 

• A globally agreed minimum corporate tax rate: Since 2021, over 130 countries have been working under OECD/G20 framework to ensure large multinational enterprises (those with revenues above €750 million) pay a 15% global minimum corporate tax rate. If a company pays less than 15% in one country, other governments can collect a "top-up" tax to make up the difference. In 2026, facing threats of US withdrawal, 147 countries and jurisdictions agreed criteria under which a country may shield its own companies from certain globally agreed taxes. As of 2026, 61 countries have laws in force based on agreed OECD/G20 framework. 

• Taxing rights based on customer base: Over 40 countries have proposed or implemented digital service taxes so that digital companies above certain in-country and global income thresholds pay taxes on services sold in that country. Since 2021, over 130 countries have also been exploring under the OECD/G20 framework ways to allocate taxing rights to countries where companies have significant customers, even without a physical presence there. The proposal would allocate 25% of "residual profit" (defined as profit in excess of 10% of revenue) to countries where an enterprise has at least €1 million in local revenue, €20 billion or more in global revenue, and a profit margin of over 10%. No agreement has been reached to date.

• Financial transparency: Australia and the EU require multinationals to publicly disclose the number of employees, income, taxes, and other financial information in every jurisdiction in which they operate — making their financial activities visible for public scrutiny to minimise tax avoidance. The OECD has also issued minimum standards for country-by-country reporting, though mandating only information-sharing amongst tax authorities rather than public disclosure. Over 100 countries have enforced these standards through their own legislation. In addition, over 100 countries have established beneficial ownership registers tracking who truly runs and profits from companies so multinationals can’t easily shift profits to shell companies located in tax havens. 

Implementation

Effective reform of multinational corporation tax requires action at both national and international levels. Leadership by willing countries can demonstrate feasibility and benefits, while internationally negotiated minimum standards can stop the race to the bottom.

At the national level, governments requires data tools, well-established tax systems and well-trained tax authority staff to enforce legislations. At international level, The UN Framework Convention on International Tax Cooperation, currently being negotiated, offers an alternative global platform than OECD- whose membership skews toward wealthy economies - for redesigning international tax rules in a more inclusive way. 

Impacts

The OECD estimated that a 15% global minimum corporate tax would reduce global low-taxed profit by 80% and generate an additional US$155–192 billion in annual tax revenues worldwide. The global minimum tax is also helping to reverse the decades-long race to the bottom: the average global corporate tax rate has increased for three consecutive years since 2023.

Broader corporate tax reform combining multiple policy approaches and going beyond minimum international standards could unlock considerably more. These gains matter most for low-income countries, which lose an estimated $200 billion a year to corporate tax avoidance, a significant portion of their annual tax revenue.

By limiting the competitive advantage that tax dodgers hold over compliant businesses, fairer corporation tax also levels the playing field for the majority of businesses that choose to abide by both the letter and spirit of tax law.

Challenges

• Geopolitical fragility. Political shifts within countries like the US — home to many of the world's largest multinationals — can easily derail international negotiations, as their non-cooperation can render a global framework ineffective.

• Equity gaps for lower-income countries. Lower-income countries have less capacity to navigate the complex taxation rules negotiated through international processes, and may lack the administrative capacity to implement and enforce them without significant capacity support.

• International minimum standards may not be sufficient to level the playing field. The agreed 15% minimum rate is considered too low by many economists and campaigners — lower than the rate most individuals pay — while exemptions and political compromises risk normalising minimal taxation rather than ending the race to the bottom. Where countries stick only to minimum standards, and where companies retain the ability to set their own internal prices between subsidiaries, multinationals still have far greater leeway in how they file and report their taxes compared to businesses that cannot or will not engage in tax avoidance.

References and Further Reading

• Tax Justice Network publishes research, develops policy proposals, tracks financial secrecy, corporate tax haven and countries’ policy progress towards fairer tax systems. 
• EU tax observatory publishes research, develops tools and maintains a public repository of data and research on tax avoidance and evasion. 
• OECD/G20 Base Erosion and Profit Shifting (BEPS) Project shares updates on government negotiations on collective actions to address multinational tax avoidance and publishes reports and guidance. 
• Wikipedia’s overview on OECD/G20 Inclusive Framework which seeks to make multinationals pay their fair share of taxes in countries where they do business. 
• Financial Accountability and Corporate Transparency (FACT) Coalition conducts research, proposes policies and campaigns for a fair international tax system. 
• Fair Tax Foundation explains why fair corporate tax is critical. 
• Global Alliance for Tax Justice campaigns for global tax rules that work for all countries, people and the planet. 

👉🏽 Click here to go back to the guide.