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Thin capitalization: the Mechanism of Resistance

Author

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  • Lyudmila V. Polezharova

    (Ministry of Finance of the Russian Federation, Moscow, Russia)

Abstract

The article author examines the international thin capitalization practices. She examines the principles used when the business organization’s expenses are recognized in the books when the interest on debt obligations is paid to the affiliated entities as the income tax base is formed. The author examines what impact the use of the recognition principle makes on the economic entities’ behavior, and the role the expenditure plays as a tax instrument. She looks into how the provisions in the international taxation agreements influence the way the thin capitalization is made on the national levels providing her own suggestions for the way the Russian capitalization rules should be formed.

Suggested Citation

  • Lyudmila V. Polezharova, 2011. "Thin capitalization: the Mechanism of Resistance," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 1, pages 23-36, January.
    • Handle: RePEc:fru:finjrn:110102:p:23-36
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    More about this item

    Keywords

    thin capitalization; national deficient capitalization rules; affiliated entities’ transactions; international taxation agreements; use of thin capitalization for getting a tax benefit;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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