Volume 9 • 2022 • Number transnational corporations investment and development

A new framework to assess the fiscal impact of
a global minimum tax on FDI
Bruno Casella
Baptiste Souillard
This document exclusively contains the equations from the paper. They are listed in
the same order. The font is “Helvetica” to match the font used in the journal.
3 A new metric: the FDI-level ETR
ETR
ic
=
CIT paid in host country c on the FDI income generated by i
FDI income generated by i and reported in host country c
ETR
FDI
ic
=
CIT on the FDI income generated by i in host country c
FDI income generated by i in host country c
ETR
FDI
c
=


1
−
h
,
h

=
c
γ
ch


ETR
c
+
h
,
h

=
c
γ
ch
ETR
h
ETR
FDI
c
=
ETR
c
−
h
,
h

=
c
γ
ch
(
ETR
c
−
ETR
h
)
(1)
1
3 
Profit shifting costs are considered negligible throughout this paper. It is in theory possible to establish 
micro-foundations and incorporate profit shifting costs à la Hines and Rice (1994). In such models, 
(non-deductible) costs incurred by firms when shifting profits from host country c to OFC h take the 
form: 
(
γ
2
ch
) π
c
 /(2k)
, where π
c
represents the profits generated in c. Hence, the share of profits shifted 
from c to h is equal to 
k(t
c
−t
h
)
(under reasonable assumptions) and profit shifting costs would enter 
equation (1). The additional term would be equal to 
⅀
h≠c
γ
2
ch
/(2k)
. In the present paper, the calibration 
is more flexible and profit shifting shares will also depend on tax rate differentials (section 6 and 
annex). Further note that the additional term in (1) would be of small magnitude. Therefore, explicitly 
incorporating profit shifting costs à la Hines and Rice (1994) would only marginally change our findings.

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A new framework to assess the fiscal impact of a global minimum tax on FDI
105
An alternative expression for the FDI-level ETR in c
is: