IMF warns of growing global tax competition

Corporate income tax policies are increasingly creating cross-border economic spillovers through profit shifting, investment reallocation and knowledge transfers, prompting the International Monetary Fund (IMF) to warn of growing risks from global competition to cut corporate tax rates for multinational companies.

The findings are presented in a chapter titled “Intangible Yet Real: Spillovers from Corporate Income Taxation” in the IMF’s October 2026 World Economic Outlook.

The report said tax competition remains an important feature of the global economy, although its nature has changed over time. Globalisation of production, the expansion of multinational companies and the growing importance of intangible assets such as intellectual property, technology and brands have transformed the corporate income tax landscape.

According to the IMF, multinational companies currently account for more than 20 percent of global gross domestic product (GDP) and around 15 percent of total corporate profits worldwide.

The study found that differences in corporate income tax rates across countries encourage multinational companies to shift profits and investment from one country to another to reduce their tax liabilities. Such moves can also affect economies beyond the countries directly involved.

The IMF further warned that tax cuts financed through borrowing could push up global interest rates and crowd out investment in other countries.

According to the researchers, stronger measures against tax evasion and avoidance could help preserve economic output while protecting government revenues.

The IMF study estimates that a one-percentage-point increase in a country’s corporate income tax rate relative to other countries could reduce foreign direct investment (FDI) inflows into that country by up to around 0.5 percent of GDP within three years.