According to the Organization for Economic Cooperation and Development (OECD), data from almost 7,600 multinationals in 2019 and 2020 shows that there are still discrepancies between the place where profits are reported and where economic activities occur. This leads to erosion of the tax base and profit shifting, emphasizing the importance of implementing the international tax agreement.
The OECD emphasized that profits taxed with few taxes are observed, regardless of whether they are countries with high or low tax burdens. More than half of the income in which an effective rate was imposed below 15 percent was in economies with tariffs above that range. The organization launched the BEPS Project in 2015 to study the tax engineering of multinationals to reduce their tax burdens.
Base erosion and profit shifting (BEPS) are part of companies’ tax planning strategies to take advantage of existing discrepancies and inconsistencies between national tax systems and artificially shift profits to places of scarcity or no taxation, where they barely carry out any economic activity, allowing them to almost completely avoid corporate tax.
According to the update of corporate statistics, presented yesterday by the OECD, data from 2020 indicate that the share of collection among corporations represented on average 3 percent of the gross domestic product (GDP) in the 116 jurisdictions analyzed; in Mexico it was close to 4 percent. The legal corporate income tax rates remained stable from 2021 to 2023, around 21.1 percent.
At the same time, the average effective rate charged to corporations has decreased modestly but constantly over five years, going from 21.7 percent in 2017 to 20.2 percent in 2022, the OECD reported. Some signs of stabilization of corporate tax rates may be due to the containment of subsidies provided to investments in research and development, which are often considered a means of attracting intangible mobile capital and can be subject to strong competitive pressures.