Global Minimum Tax Creates Disadvantages for EU Companies
Research
06.11.2025
ZEW Study Findings on the Administrative Costs of Pillar Two Model Rules
The introduction of the global minimum tax, or Pillar Two, based on the OECD model, puts European multinational enterprises at a competitive disadvantage, a joint study by ZEW Mannheim and the Tax Foundation concludes. It is the first analysis to quantify the administrative costs arising from the new tax rules for multinational enterprises headquartered in the EU. According to the study, affected companies are faced with additional compliance costs of up to 2 billion euros; recurring costs are estimated at up to 865 million euros per year. Large corporate groups that operate in several EU countries would be most affected. As other major economies are unlikely to implement the rules, the EU as a business location will also suffer financial disadvantages relative to other jurisdictions.
“Without international coordination there is a risk that the global minimum tax will fail,” explains Johannes Gaul, researcher at ZEW’s Research Unit “Corporate Taxation and Public Finance”. “If some economies delay implementing Pillar Two or decide not to implement the rules at all, the system will not work as originally intended.”
Competitive risks due to different implementation levels across jurisdictions
The approaches to introducing the global minimum tax are very heterogeneous between jurisdictions. While the EU and some other economies have already implemented the rules, large economies such as the USA, China and India are hesitating. This creates a geographic asymmetry: European companies bear the additional burden of administrative costs, while their competitors in other markets continue to benefit from simpler regulations. Even more than the implementation and recurring costs, the incomplete implementation of the Pillar Two rules by large international establishments is a factor in the distortion of competition – and may impact investment decisions and lead to relocation in the long term. From the researchers’ point of view it is therefore advisable to strengthen international coordination of implementation efforts and consider exemptions for EU companies in the event that major trading partners decide to opt out of the reform.
Complex regulations increase the financial burden on companies
According to the study, the high implementation costs and the complexity of the new rules are a further challenge. Companies need to collect and analyse additional data in order to calculate the tax base correctly in accordance with OECD requirements. This includes making adjustments between commercial and tax accounting, the recognition of unused tax losses and the country-specific determination of effective tax rates. Many companies have to adapt their IT systems and restructure their internal processes to comply with these rules.
