The study analyses the incentives for multinationals caused by linking different national tax systems. The dividend tax capitalization hypothesis is extended to include taxes during the repatriation and onward distribution (as equalization tax) to derive the relevant cost of capital formulae for each source of finance. No clear tax advantage of using debt from the parent to the foreign subsidiary is found. Tax conditions are derived for finance companies in third countries used by multinationals to park and rotate profits such as realization gains from trade sales of their subsidiaries. The same tools are applied to analyse corporate inversions.
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number
CESifo Working Paper No. 1013.
Find related papers by JEL classification: H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
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