Volume 9 • 2022 • Number transnational corporations investment and development

Figure 5. Pre- and post-Pillar Two profit shifting shares 
(Percentage)
Source
: Authors’ calculations.
Note
: Green bars represent pre-Pillar Two profit shifting shares. They also represent post-Pillar Two profit shifting shares, assuming no 
profit shifting response, as in Hanappi and Cabral (2020) and OECD (2020). Orange bars represent post-Pillar Two profit shifting shares,
assuming partial reduction of profit shifting (baseline scenario). FDI-weighted averages. LAC: Latin America and the Caribbean. LDCs: 
least developed countries. Offshore financial centres are excluded since we assume no profit shifting out of offshore financial centers 
(assumption 3).
19
19
13
14
14
11
12
24
23
17
17
18
16
17
LDCs
Memorandum
LAC
Asia
Africa
Developing economies
Developed economies
Global
Pre-Pillar Two
Post-Pillar Two 
(baseline scenario)
6.5. Additional parameters: carve-out shares (
CO
c
SHARE
) and relative 
contribution of large MNEs (
ω
c
)
Two sets of parameters are missing to complete the calibration exercise and 
calculate the impact of Pillar Two on FDI-level ETRs (equation (9)): the carve-out 
shares 
CO
c
SHARE
and
the relative contribution of large MNEs 
ω
c
. Technically, the 
profits which can be spared from the application of the minimum tax rate (i.e. 

---

TRANSNATIONAL CORPORATIONS 
Volume 29, 2022, Number 2
122
carve-out) represent 5 per cent of tangible assets and payroll.
15
We make use 
of the OECD CbCR and the OECD Activity of Multinational Enterprises (AMNE) 
databases to approximate the share of profits excluded from Pillar Two. The carve-
out share is based on the OECD AMNE database for the payroll calculation (using