Will the Global Minimum Tax Hurt Developing Countries?

Abstract

We study the effects that the introduction of the Global Minimum Tax (GMT) has from the perspective of developing countries. Our model incorporates that developing country has the weaker enforcement technology to fight profit shifting, but this makes them a more attractive location for multinationals. We show that the introduction of the GMT may hurt the developing country while benefiting the developed country. This helps explain the opposition of developing countries to the GMT.