SAEDNEWS: IMF Warns Corporate Tax Policies Can Create Cross-Border Effects Through Profit Shifting and Investment Changes
According to Saednews, The International Monetary Fund (IMF) has published a chapter titled “Intangible Yet Real: Spillovers from Corporate Income Taxation” as part of its October 2026 World Economic Outlook, examining how corporate tax policies affect investment, profits and economic activity across borders.
According to Anadolu Agency, the IMF said tax competition has remained an important feature of the global economy, although its form has evolved significantly over time.
The report's authors pointed to major changes in the international economy, including the globalization of production, the expansion of multinational corporations and the growing role of intangible assets. These developments have significantly altered the way corporate income is taxed around the world.
Multinational corporations now account for more than 20% of global gross domestic product and roughly 15% of worldwide corporate profits, highlighting their growing importance to national tax systems.
The IMF study found that differences in corporate tax rates can create significant cross-border effects. Multinational companies may respond to these differences by shifting profits or moving investment between countries in an effort to reduce their overall tax burden.
The report also warned that tax cuts financed through higher borrowing could have broader international consequences. According to the study, such policies can push global interest rates higher and potentially reduce investment in other countries.
At the same time, IMF researchers said stronger measures to prevent tax avoidance could help support economic output while safeguarding government revenues.
The study estimated that a one-percentage-point increase in a country's corporate income tax rate compared with rates in other countries was associated with a cumulative reduction in foreign direct investment inflows equivalent to about 0.5% of GDP over a three-year period.
The IMF's findings underline how corporate taxation in one country can have consequences beyond its borders, particularly as multinational businesses and intangible assets become increasingly important to the global economy.
