Profit shifting by debt financing in Europe

Arbeitspapier

This article aims at analyzing the link between subsidiaries' capital structure and taxation in Europe. First we introduce a trade-off model, which studies a MNCs' financial strategy and shows how debt policy allows multinational groups to shift profits from low-tax to high-tax jurisdictions. By letting the MNC choose both leverage and the percentage of profit shifting, we depart from the relevant literature which has mainly focused on the latter. Using the AMADEUS dataset we show that: i) subsidiaries' leverage increases with the statutory tax rate, levied in the country where it operates; ii) this positive effect is lower, the higher the parent company tax rate is. Furthermore, an increase in the parent company's tax rate is estimated to raise its subsidiaries' leverage.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 2985

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity ; Business Taxes and Subsidies including sales and value-added (VAT) ; Fiscal Policies and Behavior of Economic Agents: Firm
• Thema: capital structure ; default ; multinationals ; profit shifting ; taxation ; Gewinnverlagerung ; Multinationales Unternehmen ; Auslandsniederlassung ; Fremdkapital ; Kapitalstruktur ; Internationale Finanzierung ; Europa

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Barion, Francesca ; Miniaci, Raffaele ; Panteghini, Paolo M. ; Parisi, Maria Laura
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2010

Weitere Informationen

• Handle: http://hdl.handle.net/10419/38967
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ