According to data from almost 7,600 multinational corporations from 2019 to 2020, there are discrepancies between where profits are reported and where economic activities actually take place. This leads to erosion of the tax base and profit shifting, which highlights the need for international tax agreements. The Organization for Economic Cooperation and Development (OECD) has reported that profits taxed at low rates occur in countries with both high and low tax burdens. More than half of the income with an effective rate below 15 percent was in economies with higher tax rates.

The OECD initiated the BEPS Project in 2015 to study multinational tax engineering and reduce their tax burdens. In 2020, corporate tax revenue in large corporations represented an average of 15.1 percent in the 116 jurisdictions for which there is data, with Mexico at around 20 percent. Base erosion and profit shifting (BEPS) are part of companies’ strategies to take advantage of discrepancies between national tax systems and shift profits to places with little to no taxation where they conduct minimal economic activity, thus avoiding corporate taxes.

The OECD’s 2020 corporate statistics update shows corporate tax revenue representing an average of 3 percent of the GDP in the 116 jurisdictions analyzed, with Mexico around 4 percent. Despite legal corporate income tax rates remaining stable at around 21.1 percent from 2021 to