Corporate tax planning and thin-capitalization rules: evidence from a quasi-experiment

Journal article | Zeitschriftenartikel

This paper investigates tax-planning behaviour by means of inter-company finance and the effectiveness of government countermeasures via thin-capitalization rules. A simple theoretical model which considers the financing decision of a multinational company is used to obtain empirical implications. The empirical analysis, based on German inbound investment data from 1996 to 2004, confirms a significant impact of tax-rate differentials on the use of inter-company debt. The effectiveness of the German thin-capitalization rule is tested by using legal amendments as natural experiments. The results suggest that thin-capitalization rules induce significantly lower internal borrowing. Hence, tax planning via internal finance is effectively limited by thin-capitalization rules.

Object Details

• Extent: Seite(n): 563-573
• Language: Englisch
• Notes: Status: Postprint; begutachtet (peer reviewed)

References and Relationships

• Bibliographic citation: Applied Economics, 42(5)

Classification and Topics

• Subject: Wirtschaft ; Öffentliche Finanzen und Finanzwissenschaft ; Finanzwirtschaft, Rechnungswesen

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Overesch, Michael ; Wamser, Georg
• Event: Veröffentlichung
• (where): Vereinigte Staaten von Amerika
• (when): 2010

Further information

• DOI: https://doi.org/10.1080/00036840701704477
• URN: urn:nbn:de:0168-ssoar-242033
• Rights: GESIS - Leibniz-Institut für Sozialwissenschaften. Bibliothek Köln
• Last update: 21.06.2024, 4:26 PM CEST