Intercompany Loans and Profit Shifting – Evidence from Company-Level Data
This paper is concerned with tax-planning strategies of multinational corporations. A theoretical analysis discusses the choice of the capital structure in a setting where intercompany loans can be used to shift profits to low-tax countries. Empirical evidence is provided using micro-level panel data of virtually all German multinationals made available by the Bundesbank. This comprehensive dataset allows us to exploit differences in taxing conditions of almost eighty countries during a period of nine years. The empirical results confirm a robust impact of tax-rate differences within the multinational group on the use of intercompany loans, supporting the profit-shifting hypothesis. However, the implied tax-revenue effects are rather small, suggesting that costs related to adjusting the capital structure for profit-shifting purposes are substantial.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
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.:
- Thiess Buettner & Michael Overesch & Ulrich Schreiber & Georg Wamser, 2006.
"Taxation and Capital Structure Choice – Evidence from a Panel of German Multinationals,"
CESifo Working Paper Series
1841, CESifo Group Munich.
- Buettner, Thiess & Overesch, Michael & Schreiber, Ulrich & Wamser, Georg, 2009. "Taxation and capital structure choice--Evidence from a panel of German multinationals," Economics Letters, Elsevier, vol. 105(3), pages 309-311, December.
- Büttner, Thiess & Overesch, Michael & Schreiber, Ulrich & Wamser, Georg, 2006. "Taxation and capital structure choice: evidence from a panel of German multinationals," ZEW Discussion Papers 06-67, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Mihir A. Desai & C. Fritz Foley & James R. Hines, Jr., 2002.
"The Costs of Shared Ownership: Evidence from International Joint Ventures,"
in: Corporate Alliances
National Bureau of Economic Research, Inc.
- Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2004. "The costs of shared ownership: Evidence from international joint ventures," Journal of Financial Economics, Elsevier, vol. 73(2), pages 323-374, August.
- Ruud de Mooij & S. Ederveen, 2001.
"Taxation and foreign direct investment; a synthesis of empirical research,"
CPB Discussion Paper
3, CPB Netherlands Bureau for Economic Policy Analysis.
- de Mooij, Ruud A & Ederveen, Sjef, 2003. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," International Tax and Public Finance, Springer, vol. 10(6), pages 673-93, November.
- Ruud A. de Mooij & Sjef Ederveen, 2001. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," CESifo Working Paper Series 588, CESifo Group Munich.
- Jeffrey MacKie-Mason, 1988.
"Do Taxes Affect Corporate Financing Decisions?,"
NBER Working Papers
2632, National Bureau of Economic Research, Inc.
- Oliver D. Hart, 1988.
"Capital Structure as a Control Mechanism in Corporations,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 21(3), pages 467-76, August.
- Oliver D. Hart, 1987. "Capital Structure as a Control Mechanism in Corporations," Working papers 441, Massachusetts Institute of Technology (MIT), Department of Economics.
- Haufler, Andreas & Schjelderup, Guttorm, 2000.
"Corporate tax systems and cross country profit shifting,"
Munich Reprints in Economics
20419, University of Munich, Department of Economics.
- 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.
- Haufler, A. & Schjelderup, G., 1999. "Corporate Tax Systems and Cross Country Profit Shifting," Papers 1/99, Norwegian School of Economics and Business Administration-.
- Gordon, Roger H. & Lee, Young, 2001.
"Do taxes affect corporate debt policy? Evidence from U.S. corporate tax return data,"
Journal of Public Economics,
Elsevier, vol. 82(2), pages 195-224, November.
- Roger H. Gordon & Young Lee, 1999. "Do Taxes Affect Corporate Debt Policy? Evidence from US Corporate Tax Return Data," NBER Working Papers 7433, National Bureau of Economic Research, Inc.
- Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September.
- Aghion, Philippe & Bolton, Patrick, 1989. "The financial structure of the firm and the problem of control," European Economic Review, Elsevier, vol. 33(2-3), pages 286-293, March.
- Clausing, Kimberly A., 2003. "Tax-motivated transfer pricing and US intrafirm trade prices," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2207-2223, September.
- Jack Mintz & Alfons Weichenrieder, 2005. "Taxation and the Financial Structure of German Outbound FDI," CESifo Working Paper Series 1612, CESifo Group Munich.
- Swenson, Deborah L., 2001. "Tax Reforms and Evidence of Transfer Pricing," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 7-26, March.
- Mihir A. Desai & C. Fritz Foley & James R. Hines, 2004.
"A Multinational Perspective on Capital Structure Choice and Internal Capital Markets,"
Journal of Finance,
American Finance Association, vol. 59(6), pages 2451-2487, December.
- Mihir A. Desai & C. Fritz Foley & James R. Hines, Jr., 2003. "A Multinational Perspective on Capital Structure Choice and Internal Capital Markets," NBER Working Papers 9715, National Bureau of Economic Research, Inc.
- Hines, James R. Jr., 1999. "Lessons from Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 305-22, June.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1959. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.