What is a tax haven, and what did the 15% global minimum corporate tax deal change?

A tax haven is a place with very low tax rates for investors who do not live there, a term often used pejoratively, even when its official rates may look higher. The idea is that companies and wealthy people can record income or assets there and pay far less tax than at home. A 15 percent global minimum tax on big companies, agreed in principle in 2021, was designed to put a floor under that race to the bottom.

Modern tax havens are not only palm-fringed islands. The source describes modern corporate tax havens as having non-zero headline rates and large networks of tax treaties, though tools for making income exempt let companies end up near zero in practice. Banking secrecy has ended in many places and most countries share account data, which has reduced individual tax evasion, but huge multinationals can still shift profits to corporate tax havens using intricate schemes. Estimates vary: annual taxes lost are put in the hundreds of billions of dollars, and in 2018 Gabriel Zucman and co-authors estimated that profit shifting shields over 250 billion dollars a year.

The 2021 deal sits under the OECD/G20 Inclusive Framework's 'Pillar Two'. The aim is to reduce tax competition between countries and discourage multinationals from profit shifting. On 1 July 2021, 130 countries backed an OECD plan for a 15 percent minimum, and Ireland, Hungary and Estonia agreed on 8 October on condition that the rate was not raised.

The deal has been judged very differently. France's finance minister called 15 percent a starting point, and the Tax Justice Network's chief executive called it historic but unfair and said it should have been at least 25 percent. In January 2025 the US said it would effectively withdraw, and in January 2026, 147 members agreed a 'side-by-side' arrangement accommodating US objections. This lesson only reports the arrangements.