Volume 9 • 2022 • Number transnational corporations investment and development

6.3. Pre-Pillar Two profit shifting shares: 
γ
ch
To calibrate pre-Pillar Two FDI-level ETRs (equation (1)), the share of profits 
shifted to each OFC needs to be computed for more than 200 host countries. 
In other words, we need to estimate a host country-OFC matrix of bilateral profit 
shifting shares. Quantifying profit shifting is another challenging task because it is 
not directly observed. Three main approaches have been adopted in the recent 
literature to gauge its magnitude, namely: (i) the misalignment approach; (ii) the 
approach taken by Tørsløv et al. (2021); and (iii) the tax semi-elasticity approach.
10 
In CbCR data, intra-company dividends are excluded from revenues but might still be double counted 
in profits, especially for the United States but more generally for developed economies. See discussions 
in Clausing (2020), Garcia-Bernardo et al. (2021) and Garcia-Bernardo and Janský (2022).

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A new framework to assess the fiscal impact of a global minimum tax on FDI
115
Figure 3. STRs and CbCR-based ETRs
Source
: Authors’ calculations.
Note
: Data from 2017. STR: Statutory tax rate from the Tax Foundation. ETR: effective tax rate from Garcia-Bernardo and Janský (2022).
Subfigure (a): ETRs on the y-axis and STRs on the x-axis. Correlation coefficient equals to 
0.443. ETR
c
CbCR 
= 3.957 + 0.504 * STR
c
, R
2
 
= 0.196. 
Subfigure (b): Simple average across countries. LAC: Latin America and the Caribbean. LDCs: least developed countries. OFCs: offshore 
financial centeres. OFCs are included only in the “OFCs” category.
(a) Country-level tax rates 
(Percentage)
(b) Average tax rates 
(Percentage)
ET
R f
ro
m C
bC
R 
STR
STR
ETR
0
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
7
22
21
19
25
20
16
19
18
27
28
22
29
26
22
25
OFCs
LDCs
Memorandum
LAC
Asia
Africa
Developing economies
Developed economies
Global
Observations
Linear fit