OECD tax report finds 'modest reductions' in multinational profit shifting

The share of corporate tax revenues grew from 15.9 per cent to 17.8 per cent of the total tax take in 2022 as large multinational entities (MNEs) contributed more and tax rates stabilised, the OECD’s Corporate Tax Statistics 2025 report shows.

In 2022, large MNEs contributed an average of 47.1 per cent of total corporate tax revenues, up from 44.4 per cent in 2017. Data also indicated that base erosion and profit shifting (BEPS) activity had fallen in recent years.

“The data suggest modest reductions in base erosion and profit shifting in recent years. High-level indicators of potential BEPS activity have fallen in investment hubs relative to their values five years prior,” the OECD’s executive summary noted.

Investment hubs are jurisdictions that attract high levels of foreign direct investment (FDI) compared to their economic substance, typically defined as those with FDI above 150 per cent of their gross domestic product.

BEPS indicators, including median profits per employee, revenues per employee and related party revenues as a share of total revenue, had all fallen within these hubs from 2017 to 2022, but remained “far higher” relative to other jurisdictions.

Data from 2022 indicated that the median value of profits per employee in investment hubs was US$85,000, compared to US$18,000 for all other jurisdictions. This was still a decline from 2017 levels, where the median value of profits per employee was US$105,000.

The OECD report also found that progress had been made in the OECD/G20 BEPS Project, which was launched to address tax avoidance and double non-taxation of MNE profits by closing gaps that had emerged in the international tax system due to globalisation.

As of 2025, 45 jurisdictions, including Australia, had imposed rules to neutralise ‘hybrid mismatch’ arrangements, where companies could exploit differences in the tax treatment of entities between jurisdictions to incur double tax deductions, double non-taxation or long-term deferral of tax.

Almost half (22) of these jurisdictions had implemented the rules from 2019 or later, reflecting continued global efforts to close international tax gaps.

As of 2022, 106 jurisdictions had imposed laws requiring mandatory filing of country-by-country reports. The OECD noted that tax authorities were using country-by-country information to identify MNE groups for possible audit, exclude MNE groups that did not need to be audited, and to help plan for other enquiries.

The OECD report also indicated that corporate tax rates were stabilising after a two-decade downward trend. The average combined statutory corporate income tax rate declined from 28 per cent in 2000 to 21.7 per cent in 2019. The average rate stood at 21.2 per cent in 2025.

Alongside this, the generosity of R&D tax incentives appeared to be plateauing. Expenditure-based R&D tax subsidies reduced effective tax rates from 34 per cent in 2024, down from 35.1 per cent in 2021.

“While R&D incentives can provide important tax support for R&D and innovation, they are also often seen as a means of attracting mobile intangible investment which can be subject to strong competitive pressures,” the OECD noted.