In October 2021, 136 OECD countries and jurisdictions representing more than 90% of global GDP signed a landmark agreement on a major reform of the international tax system to ensure a minimum tax rate of 15% for multinational companies starting in 2023. The taxes paid by these large multinationals will increase, but who will suffer the consequences?  Some multinationals have already indicated that they will raise the prices of their services in response to this reform, implying that part of the tax will be paid by consumers. Others suggest that they will negotiate down the prices paid to their suppliers, shifting the burden of the tax onto those third parties. Businesses may also respond by reducing wages, thereby shifting the burden of the tax onto their workforce. Finally, other businesses may choose to delocalize their operations.

This example illustrates the difference between the statutory impact and the tax impact. From an accounting perspective, the tax is borne by those who pay it. This is called the statutory impact. But in reality, the party that pays a tax does not necessarily bear the cost. In other words, part of the tax burden will actually be borne by businesses, but part will be passed on to other economic agents. This is called tax incidence.

This report provides a review of the most recent literature on the subject that will be very useful in thinking about the implementation of tax policies and their implications. The authors review the theoretical and empirical literature in detail and draw out nine key lessons regarding the impact of corporate income taxation, dividend taxation and payroll taxes. Impacts on prices, wages, investment and location decisions, and tax avoidance or tax optimization activities are examined.