EUTaxObservatoryWorkingPaperNo.25 GlobalMinimumTax andProBitShifting January2025 TomášBoukal PetrJanský MiroslavPalanský

The estimation of the three types of top-up taxes—corresponding to the first three components of the overall change in tax revenue above—follows a similar logic and is a multiple of undertaxed profits, πundertaxed, and a tax rate, τ , which is the difference between the effective tax rate and the minimum rate of 15%. [...] The reports are prepared by a multinational at the level of the ultimate parent entity and filed to the tax authority of the multinational’s headquarters, which then shares the report with tax authorities in other countries where the multinational’s subsidiaries are situated. [...] We describe the results of the tax base adjustments for the Slovak domestic top-up tax by Slovakia in Appendix Table 3.4 We estimate that roughly half of the 4% increase in Slovakia’s corporate tax revenue is due to top-up taxes levied by Slovakia, while the other half is due to a decrease in profit shifting out of Slovakia. [...] By the application of a change in tax differentials before and after the application of the 15% minimum tax rate, we estimate that EUR 3 million would no longer be collected on top-up taxes, reducing the share of companies shifting profits into Slovakia to EUR 20 million and the final estimate of Domestic top-up tax to EUR 44 million. [...] Slightly over a half of the projected revenue increase is due to the application of minimum top-up taxes in Slovakia, with the other half of the increase due to newly collected corporate income tax on profits currently shifted out of the country but targeted by the global minimum tax reform.