Arbeitspapier

Transfer Pricing and Debt Shifting in Multinationals

There is a growing concern that governments lose substantial corporate tax revenue because of profit shifting through transfer-pricing and thin-capitalization strategies. Existing literature studies profit shifting and transfer pricing separately. In practice, the choice of debt-to-asset ratios in affiliates and the transfer price of debt are interrelated management decisions that are also mutually affected by government regulation. This paper models these strategies as intertwined. We find that the tax sensitivity of the corporate tax base depends on whether the debt shifting and transfer pricing are cost complements or substitutes. A second result is that stricter regulation of debt shifting (transfer pricing) can potentially increase the use of transfer pricing (debt shifting) and thus the amount of profits shifted.

Sprache
Englisch

Erschienen in
Series: CESifo Working Paper ; No. 4381

Klassifikation
Wirtschaft
Business Taxes and Subsidies including sales and value-added (VAT)
Multinational Firms; International Business
Firm Behavior: Theory
Thema
multinational corporations
profit shifting
debt shifting
concealment costs

Ereignis
Geistige Schöpfung
(wer)
Schindler, Dirk
Schjelderup, Guttorm
Ereignis
Veröffentlichung
(wer)
Center for Economic Studies and ifo Institute (CESifo)
(wo)
Munich
(wann)
2013

Handle
Letzte Aktualisierung
10.03.2025, 11:45 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Schindler, Dirk
  • Schjelderup, Guttorm
  • Center for Economic Studies and ifo Institute (CESifo)

Entstanden

  • 2013

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