In October 2021, over 130 countries and jurisdictions participating in the OECD/G20 Inclusive Framework agreed to a two-pillar reform of international corporate taxation. Pillar Two introduced a 15% global minimum tax (GMT) on the profits of large multinational enterprises (MNEs). The policy aims to curb the ‘race to the bottom’ among jurisdictions that compete by offering ever lower corporate tax rates and to reduce profit shifting.

The academic literature points to ambiguous welfare effects of the global minimum tax. On the one hand, higher tax receipts and a reduction in profit‑shifting improve the efficiency of the tax system. On the other hand, a higher effective tax burden raises firms’ cost of capital, potentially curbing investment and output. Prior work has either measured the revenue impact (e.g. Baraké et al. 2022, Hugger et al. 2024a, 2024b) or examined stylised theoretical models (e.g. Johannesen 2022, Hebous and Keen 2023). Our research offers a comprehensive, quantitative assessment of the net welfare effects that captures both channels simultaneously, taking stock of the change in policy stance by the US administration (Brun et al. 2026).

Simulating the global minimum tax in a macroeconomic model

We use a macro-economic model, Cortax, which is specifically designed to analyse corporate tax reforms. The model is calibrated to the 27 EU member states, the UK, the US, Japan and a representative tax haven. The model incorporates profit shifting through transfer pricing and a tax haven channel. This approach allows us to track the impact of the GMT on capital, labour, output, government revenues, and household welfare.

The GMT imposes a floor on the effective tax rate (ETR) of MNEs in every jurisdiction. Therefore, we assume that all countries either impose a corporate income tax rate of at least 15% or charge a qualified domestic top up tax (QDMTT) on MNEs to raise their rate to 15%. This is the long-run equilibrium where backstop regulations (the income inclusion rule, or IIR, and the undertaxed profits rule, or UTPR) are not required.

Imposing the GMT raises revenue for governments, who must determine how to allocate these resources. We simulate two options: first, additional revenue is returned to households as lump-sum transfers (transfer closure), and second, extra revenue is used to lower the statutory corporate income tax rate, leaving total corporate tax receipts unchanged (corporate tax rate closure). Both closures are revenue neutral from the perspective of the state, but they differ in how the gains are redistributed, which turns out to be crucial for the welfare outcomes.

A modest global gain

Our results show a global welfare gain, whose magnitude depends on the closure. If additional revenues are returned to households, as in the case of the transfer closure, then the rise in global welfare (measured as the compensating variation) is €3.7 billion for a GMT of 15% (see Table 1). In the corporate tax rate closure additional revenues are recycled into a supply-side measure, namely, lowering the corporate tax rate (provided all effective rates remain above 15%). In this case, the rise in global welfare is €39.0 billion, which represents around one-tenth of a percent of global GDP.

Table 1 Macroeconomic results from introducing a global minimum tax

These results are driven by a mix of factors with opposing effects. Our framework quantitatively evaluates the combined and net impact of increasing government revenues and reducing wasteful profit shifting, which are welfare improving, against the increased cost of capital for firms, which may reduce investment. Note that welfare is measured as household utility, which is determined by both consumption and leisure.

Winners and losers 

The aggregate numbers conceal a great deal of heterogeneity. Figures 1 plots each country’s change in the effective tax rate on MNE profits (horizontal axis) against the simulated welfare change (vertical axis) for the two closures. 

Figure 1 Welfare impact of global minimum tax by country

a) Transfer closure            

b) Corporate tax rate closure

Note: Luxembourg has been omitted for clarity; full results in Brun et al., 2026.

Countries with a tax rate below 15% before the global minimum tax (shown in red) experience large increases in their effective corporate tax rate, which raises revenue at a cost of an additional burden on firms. Countries with a tax rate above 15% (shown in black) are not constrained by the global minimum tax. In the transfer closure case, they, nevertheless, see some rise in their effective rate due to reduced profit shifting. In the corporate tax rate closure case, they lower their statutory tax rate to leave revenues unchanged following a reduction in profit shifting, thereby decreasing their effective tax rates. 

In both cases, there are notable variations across countries. In the corporate tax rate closure, most countries are better off, but the welfare effects remain uneven. Note that welfare gains are also experienced by the representative tax haven from increased revenues, despite a lower volume of profits being shifted. Overall, the welfare gains in both scenarios would be sufficient to compensate the countries with negative welfare outcomes, suggesting potential Pareto improvements.  

The optimal global minimum tax rate

We simulate global minimum tax rates ranging from 10% to 25%. Figure 2 shows the global welfare change associated with these different minimum rates for the two closures.

Figure 2 Global welfare impacts for different global minimum tax rates

Our results suggest that a global minimum tax rate slightly higher than 15% would in fact be optimal. Under the transfer closure, welfare rises steadily up to an 18% rate, after which the contractionary economic effects dominate the welfare gains from other channels. Under the corporate tax rate closure, the maximum is reached at a 16% rate, though positive welfare gains continue until a 21% rate.

Is US participation essential?

In January 2026, the OECD Inclusive Framework adopted a Side-by-Side agreement that largely exempts US-parented multinationals from Pillar Two’s UTPR top-up taxes by recognising the US’s revised Net CFC Tested Income (NCTI) regime, which replaced the Global Intangible Low-Taxed Income (GILTI) regime and related regulations as an alternative minimum tax framework (OECD 2026). Because the US has not implemented Pillar Two, US firms would not be subject to IIR, so they would ordinarily face UTPR exposure. Side-by-Side agreement largely removes that risk. US firms remain subject to QDMTTs and ongoing compliance obligations for profits reported in Pillar Two implementing countries. Therefore, a crucial question for any analysis of the global minimum tax is how the US non-participation impacts the system as a whole.

We simulate the global minimum tax regime with the US firms exempt from its provisions in accordance with the US non-participation and the Side-by-Side agreement. The US firms are bound by GILTI/NCTI, however, these rules may or may not bind for any given MNE. To provide a conservative assessment, we simulate the case where GILTI/NCTI is not binding for US MNEs (see Table 2).

Table  2 Macroeconomic results from introducing a global minimum tax without the US

Interestingly, the results for the adoption of a 15% GMT without US participation are not very different from universal adoption (compare Table 1). In the corporate tax rate closure, global welfare gains are lower (€27.4 billion compared with €39.0 billion) but remain clearly positive. This limited effect reflects the design of Pillar Two and the Side-by-Side agreement. Much of the reform operates through domestic minimum taxes imposed by implementing countries, reducing the scope for profit shifting for all multinationals, including US multinationals, in many cases through QDMTTs. Beneath these aggregates, there are modest changes, such as reduced revenues from US firms collected by EU countries, since US firms can still shift profit to low-tax havens. Nevertheless, overall, this robustness exercise suggests that the welfare and macroeconomic implications of Pillar Two are largely insensitive to whether US MNEs are fully subject to the global minimum tax or covered by the Side-by-Side agreement. 

Improved efficiency through co-ordination

The global minimum tax marks a major shift in the architecture of international corporate taxation. Our quantitative welfare assessment shows that global welfare improvements are likely. Welfare benefits could even slightly improve with a modestly higher minimum rate. 

Crucially, these benefits accrue regardless of whether the US participates, suggesting that Pillar 2 can generate meaningful progress even if its adoption is not universal. The global minimum tax has the potential to move the international corporate tax system away from a race to the bottom to a place where tax competition is curbed, profit shifting is limited, and overall welfare rises.

Authors’ note: This column reflects the opinions of the authors and not necessarily those of the European Commission.

References

Baraké, M, P-E Chouc, T Neef and G Zucman (2022), “Revenue Effects of the Global Minimum Tax under Pillar Two”, Intertax 50(10): 689-710. 

Brun, L, D Stöhlker, J Pycroft and M A Van ‘t Riet (2026), “Potentially Positive – Welfare Assessment of the Global Minimum Tax”, JRC Working Paper Series on Taxation and Structural Reforms 04/2025, version 2. 

Hebous, S and M Keen (2023), “Pareto-improving minimum corporate taxation”, Journal of Public Economics 225, 104952. 

Hugger, F, A C Gonzáles Cabral, M Bucci, M Gesualdo and P O’Reilly (2024a), “The Global Minimum Tax and the taxation of MNE profit”, OECD Taxation Working Paper No. 68. 

Hugger, F, A C Gonzáles Cabral, M Bucci, M Gesualdo and P O’Reilly (2024b), “How the Global Minimum Tax changes the taxation of multinational companies”, VoxEU.org, 22 June. 

Johannesen, N (2022), “The global minimum tax”, Journal of Public Economics 212, 104709. 

OECD (2026), Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two), Side-by-Side Package, Inclusive Framework on BEPS.