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

  • Jack M. Mintz

    ()

    (University of Toronto and C. D. Howe Institute)

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-2.rotman.utoronto.ca/iib/ITP0410.pdf
File Function: second version, 2004
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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
Contact details of provider: Postal: 105 St. George St., Toronto, Ontario, M5S 3E6
Phone: 416 978 2451
Web page: http://www-2.rotman.utoronto.ca/iib
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  1. Alfons Weichenrieder, 1996. "Anti-tax-avoidance provisions and the size of foreign direct investment," International Tax and Public Finance, Springer, vol. 3(1), pages 67-81, January.
  2. Haufler, A. & Schjelderup, G., 1999. "Corporate Tax Systems and Cross Country Profit Shifting," Papers 1/99, Norwegian School of Economics and Business Administration-.
  3. 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.
  4. Huizinga, H.P., 1994. "International interest withholding taxation : Prospects for a common European policy," Other publications TiSEM 3d92ccee-19e6-4a36-8a00-3, Tilburg University, School of Economics and Management.
  5. Weichenrieder, Alfons J, 1996. " Transfer Pricing, Double Taxation, and the Cost of Capital," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(3), pages 445-52.
  6. Rosanne Altshuler & Jack Mintz, 1994. "U.S. Interest Allocation Rules: Effects and Policy," NBER Working Papers 4712, National Bureau of Economic Research, Inc.
  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.
  8. Clemens Fuest & Bernd Huber & Jack Mintz, 2003. "Capital Mobility and Tax Competition: A Survey," CESifo Working Paper Series 956, CESifo Group Munich.
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