Real Responses to Anti-Tax Avoidance: Evidence from the UK Worldwide Debt Cap

Arbeitspapier

We analyze how multinational firms reallocate real operations and debt across their affiliates in response to anti-tax avoidance policies. The UK introduced a worldwide debt cap in 2010, generating a quasi-natural experiment that limited interest deductibility for a group of multinational firms. We find that multinationals affected by the reform reduced the amount of debt held in the UK and increased debt held abroad. Affected multinationals reallocated a share of their real operations away from the UK. Our findings provide causal evidence for tax-motivated debt and real activity reallocation within multinationals and show how multinationals can circumvent tax avoidance regulations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9044

Classification and Topics

• Classification: Wirtschaft ; Business Taxes and Subsidies including sales and value-added (VAT) ; Tax Evasion and Avoidance
• Subject: debt shifting ; multinational companies ; capital reallocation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bilicka, Katarzyna Anna ; Qi, Yaxuan ; Xing, Jing
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/235414
• Last update: 10.03.2025, 11:44 AM CET