The Tax Treatment of Interest Expenditures of Multinational Enterprises
AbstractThis paper analyses the national tax treatment of interestexpenditures of multinational enterprises in a non-cooperative world. It is shown that the international tax systemgenerally leads to distortions in the capitaldecisions of multinational firms. In contrast to the existingliterature on the tax treatment of the expendituresof multinationals, it is found that the form and size of distortionscan differ per country depending on the stakea country has in the multinational. Furthermore, internationalisationof the firm's operations and ownership isdemonstrated to lead to less generous interest deduction rules ofindividual countries and in the limit mayresult in no deduction allowance at all.
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Date of creation: 09 Jun 2000
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International Investment; Multinational Firms; Optimal Taxation; Interest Expenditures; R&D Expenditures;
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-07-27 (All new papers)
- NEP-FIN-2000-07-27 (Finance)
- NEP-PUB-2000-07-27 (Public Finance)
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