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Profit shifting via intragroup lending: measuring and comparing the debt structure and interest rate channels

Author

Listed:
  • Nadia Accoto

    (Bank of Italy)

  • Federica Daniele

    (Bank of Italy)

  • Valerio Della Corte

    (Bank of Italy)

Abstract

Multinational groups can use intragroup lending to shift their profits to low-tax jurisdictions so as to minimize their tax liability. We provide novel evidence on the extent of profit shifting via intragroup lending. Our findings suggest that firms are more likely to take on a greater share of related foreign party debt than non-related foreign party debt when the multinational group they belong to has affiliates in low-tax jurisdictions; we have also found that the interest rate paid on related party debt tends to be higher than the interest rate paid to non-related counterparties. The importance of tax motivations is confirmed by the disproportionate reliance on internal borrowing from affiliates in countries listed as tax havens among firms with higher EBITDA and spare interest deductibility capacity. Finally, we try to quantify the amount of corporate tax dodged via intragroup lending in Italy over the 2013-2022 period and show that it is relatively modest overall.

Suggested Citation

  • Nadia Accoto & Federica Daniele & Valerio Della Corte, 2026. "Profit shifting via intragroup lending: measuring and comparing the debt structure and interest rate channels," Temi di discussione (Economic working papers) 1529, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1529_26
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2026/2026-1529/en_tema_1529.pdf
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    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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