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Conduit Entities: Implications of Indirect Tax-Efficient Financing Structures for Real Investment

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Author Info
Jack M. Mintz () (University of Toronto and C. D. Howe Institute)

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Abstract

As well known, companies shift income from high to low tax jurisdictions. Typically, profit shifting is achieved by “direct” financing structures whereby companies use debt finance in the high tax entity and equity finance in the low tax entity. However, certain tax policies can lead to “indirect” financing structures whereby a conduit entity provides an opportunity to achieve at least two deductions for interest expenses for an investment made in the host country. The effect of “direct” and “indirect” financing structures on real investment is compared.

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File URL: http://www.rotman.utoronto.ca/iib/ITP0410.pdf
File Format: application/pdf
File Function: second version, 2004
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Publisher Info
Paper provided by International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto in its series International Tax Program Papers with number 0410.

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Length: 29 pages
Date of creation: Apr 2003
Date of revision: Sep 2004
Publication status: Published under same title in International Tax and Public Finance, vol. 11, no. 4, pp. 419-34.
Handle: RePEc:ttp:itpwps:0410

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Related research
Keywords: Business taxes; Multi-national finance and investment;

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Haufler, Andreas & Schjelderup, Guttorm, 2000. "Corporate Tax Systems and Cross Country Profit Shifting," Oxford Economic Papers, Oxford University Press, vol. 52(2), pages 306-25, April.
    Other versions:
  2. Weichenrieder, Alfons J, 1996. " Transfer Pricing, Double Taxation, and the Cost of Capital," Scandinavian Journal of Economics, Blackwell Publishing, vol. 98(3), pages 445-52.
  3. Clemens Fuest & Bernd Huber & Jack Mintz, 2003. "Capital Mobility and Tax Competition: A Survey," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Rosanne Altshuler & Jack Mintz, 1994. "U.S. Interest Allocation Rules: Effects and Policy," NBER Working Papers 4712, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Jack M. Mintz & Michael Smart, 2001. "Income Shifting, Investment, and Tax Competition: Theory and Evidence from Provincial Taxation in Canada," International Tax Program Papers 0402, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto, revised Apr 2003. [Downloadable!]
    Other versions:
  6. Harry Huizinga, 1994. "International interest withholding taxation: Prospects for a common European policy," International Tax and Public Finance, Springer, vol. 1(3), pages 277-291, October. [Downloadable!] (restricted)
  7. Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marcel Gérard, 2006. "Reforming the Taxation of Multijurisdictional Enterprises in Europe, a Tentative Appraisal," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Fred Ramb & Alfons Weichenrieder, 2004. "Taxes and the Financial Structure of German Inward FDI," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  3. Andreas Haufler & Marco Runkel, 2008. "Firms’ Financial Choices and Thin Capitalization Rules under Corporate Tax Competition," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  4. Overesch, Michael, 2007. "The Effects of Multinationals? Profit Shifting Activities on Real Investments," ZEW Discussion Papers 07-071, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  5. Alfons J. Weichenrieder & Jack Mintz, 2008. "What determines the use of holding companies and ownership chains?," Working Papers 0803, Oxford University Centre for Business Taxation. [Downloadable!]
  6. Qing Hong & Michael Smart, 2007. "In Praise of Tax Havens: International Tax Planning and Foreign Direct Investment," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  7. Alfons Weichenrieder, 2007. "Profit Shifting in the EU: Evidence from Germany," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
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