Arbeitspapier

Interest limitation rules and business cycles: Empirical evidence

This paper studies the performance of interest limita- tion rules during business cycles. It employs register data on Finnish affiliates of multinational enterprises (MNEs) to study both thin-capitalization rules (TCRs) and earnings-stripping rules (ESRs). Both types of rules are found to become tighter in economic downturns: TCRs due to higher debt-to-equity ratios and ESRs due to lower company profits. Among equally tight interest limitation rules, TCRs are found to provide less variation and less pro-cyclical outcomes by increasing the compa- ny tax burden less than ESRs in an economic downturn. While ESRs increase the tax burden of Finnish compa- nies by 17.5%-19.3% following the 2008 global financial crisis, for TCRs the increase is less than 10%. Among the ESRs, we find that an EBIT rule induces tighter tax treat- ment in economic downturns than an EBITDA rule. How- ever, the differences between ESRs remain very small.

Sprache
Englisch

Erschienen in
Series: ETLA Working Papers ; No. 90

Klassifikation
Wirtschaft
Business Taxes and Subsidies including sales and value-added (VAT)
Tax Evasion and Avoidance
International Business Cycles
Thema
Business cycles
Corporate income taxation
Anti-tax avoidance rules
Thin-Capitalization Rules (TCRs)
Earnings Stripping Rules (ESRs)

Ereignis
Geistige Schöpfung
(wer)
Ropponen, Olli
Ereignis
Veröffentlichung
(wer)
The Research Institute of the Finnish Economy (ETLA)
(wo)
Helsinki
(wann)
2021

Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Ropponen, Olli
  • The Research Institute of the Finnish Economy (ETLA)

Entstanden

  • 2021

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