Capital Structure And International Debt Shifting

Author : Mr.Luc Laeven,Gaetan Nicodeme,Harry Huizinga
Publisher : International Monetary Fund
Page : 39 pages
File Size : 46,6 Mb
Release : 2007-02-01
Category : Business & Economics
ISBN : 9781451866032

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Capital Structure and International Debt Shifting by Mr.Luc Laeven,Gaetan Nicodeme,Harry Huizinga Pdf

This paper presents a model of a multinational firm's optimal debt policy that incorporates international taxation factors. The model yields the prediction that a multinational firm's indebtedness in a country depends on a weighted average of national tax rates and differences between national and foreign tax rates. These differences matter because multinationals have an incentive to shift debt to high-tax countries. The predictions of the model are tested using a novel firm-level dataset for European multinationals and their subsidiaries, combined with newly collected data on the international tax treatment of dividend and interest streams. Our empirical results show that corporate debt policy indeed not only reflects domestic corporate tax rates but also differences in international tax systems. These findings contribute to our understanding of how corporate debt policy is set in an international context.

Author : Harry Huizinga,Luc Laeven,Gaëtan Nicodème
Publisher : Unknown
Page : 42 pages
File Size : 50,7 Mb
Release : 2006
Category : International business enterprises
ISBN : 9279038397

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Capital Structure and International Debt Shifting by Harry Huizinga,Luc Laeven,Gaëtan Nicodème Pdf

Author : Ms.Grace Weishi Gu,Ruud A. de Mooij,Mr.Tigran Poghosyan
Publisher : International Monetary Fund
Page : 35 pages
File Size : 53,9 Mb
Release : 2012-11-30
Category : Business & Economics
ISBN : 9781475540680

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Taxation and Leverage in International Banking by Ms.Grace Weishi Gu,Ruud A. de Mooij,Mr.Tigran Poghosyan Pdf

This paper explores how corporate taxes affect the financial structure of multinational banks. Guided by a simple theory of optimal capital structure it tests (i) whether corporate taxes induce subsidiary banks to raise their debt-asset ratio in light of the traditional debt bias; and (ii) whether international corporate tax differentials vis-a-vis foreign subsidiary banks affect the intra-bank capital structure through international debt shifting. Using a novel subsidiary-level dataset for 558 commercial bank subsidiaries of the 86 largest multinational banks in the world, we find that taxes matter significantly, through both the traditional debt bias channel and the international debt shifting that is due to the international tax differentials. The latter channel is more robust and tends to be quantitatively more important. Our results imply that taxation causes significant international debt spillovers through multinational banks, which has potentially important implications for tax policy.

Author : Asl? Demirgüç-Kunt,Vojislav Maksimovic
Publisher : World Bank Publications
Page : 44 pages
File Size : 48,8 Mb
Release : 1994
Category : Capital
ISBN : 8210379456XXX

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Capital Structures in Developing Countries by Asl? Demirgüç-Kunt,Vojislav Maksimovic Pdf

Variables that predict capital structure in the United States also predict choices of capital structure in a sample of ten developing countries. In several countries, total indebtedness is negatively related to net fixed assets, suggesting that markets for long- term debt do not function effectively.

Author : Jennifer Blouin,Harry Huizinga,Mr.Luc Laeven,Gaetan Nicodeme
Publisher : International Monetary Fund
Page : 37 pages
File Size : 54,9 Mb
Release : 2014-01-24
Category : Business & Economics
ISBN : 9781484384442

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Thin Capitalization Rules and Multinational Firm Capital Structure by Jennifer Blouin,Harry Huizinga,Mr.Luc Laeven,Gaetan Nicodeme Pdf

This paper examines the impact of thin capitalization rules that limit the tax deductibility of interest on the capital structure of the foreign affiliates of US multinationals. We construct a new data set on thin capitalization rules in 54 countries for the period 1982-2004. Using confidential data on the internal and total leverage of foreign affiliates of US multinationals, we find that thin capitalization rules significantly affect multinational firm capital structure. Specifically, restrictions on an affiliate’s debt-to-assets ratio reduce this ratio on average by 1.9%, while restrictions on an affiliate’s borrowing from the parent-to-equity ratio reduce this ratio by 6.3%. Also, restrictions on borrowing from the parent reduce the affiliate’s debt-to-assets ratio by 0.8%, which shows that rules targeting internal leverage have an indirect effect on the overall indebtedness of affiliate firms. The impact of capitalization rules on affiliate leverage is higher if their application is automatic rather than discretionary. Furthermore, thin capitalization regimes have aggregate firm effects: they reduce the firm’s aggregate interest expense but lower firm valuation. Overall, our results show than thin capitalization rules, which thus far have been understudied, have a substantial effect on the capital structure within multinational firms, with implications for the firm’s market valuation.

Author : Ruud A. de Mooij
Publisher : International Monetary Fund
Page : 25 pages
File Size : 45,6 Mb
Release : 2011-05-03
Category : Business & Economics
ISBN : 9781463935139

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Tax Biases to Debt Finance by Ruud A. de Mooij Pdf

Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011.

Author : Ruud A. de Mooij,Shafik Hebous
Publisher : International Monetary Fund
Page : 20 pages
File Size : 46,5 Mb
Release : 2017-02-10
Category : Business & Economics
ISBN : 9781475578294

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Curbing Corporate Debt Bias by Ruud A. de Mooij,Shafik Hebous Pdf

Tax provisions favoring corporate debt over equity finance (“debt bias”) are widely recognized as a risk to financial stability. This paper explores whether and how thin-capitalization rules, which restrict interest deductibility beyond a certain amount, affect corporate debt ratios and mitigate financial stability risk. We find that rules targeted at related party borrowing (the majority of today’s rules) have no significant impact on debt bias—which relates to third-party borrowing. Also, these rules have no effect on broader indicators of firm financial distress. Rules applying to all debt, in contrast, turn out to be effective: the presence of such a rule reduces the debt-asset ratio in an average company by 5 percentage points; and they reduce the probability for a firm to be in financial distress by 5 percent. Debt ratios are found to be more responsive to thin capitalization rules in industries characterized by a high share of tangible assets.

Author : International Monetary Fund. Fiscal Affairs Dept.
Publisher : International Monetary Fund
Page : 78 pages
File Size : 45,7 Mb
Release : 2016-12-10
Category : Business & Economics
ISBN : 9781498345200

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Tax Policy, Leverage and Macroeconomic Stability by International Monetary Fund. Fiscal Affairs Dept. Pdf

Risks to macroeconomic stability posed by excessive private leverage are significantly amplified by tax distortions. ‘Debt bias’ (tax provisions favoring finance by debt rather than equity) has increased leverage in both the household and corporate sectors, and is now widely recognized as a significant macroeconomic concern. This paper presents new evidence of the extent of debt bias, including estimates for banks and non-bank financial institutions both before and after the global financial crisis. It presents policy options to alleviate debt bias, and assesses their effectiveness. The paper finds that thin capitalization rules restricting interest deductibility have only partially been able to address debt bias, but that an allowance for corporate equity has generally proved effective. The paper concludes that debt bias should feature prominently in countries’ tax reform plans in the coming years.

Author : M. Ayhan Kose,Peter Nagle,Franziska Ohnsorge,Naotaka Sugawara
Publisher : World Bank Publications
Page : 403 pages
File Size : 42,8 Mb
Release : 2021-03-03
Category : Business & Economics
ISBN : 9781464815454

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Global Waves of Debt by M. Ayhan Kose,Peter Nagle,Franziska Ohnsorge,Naotaka Sugawara Pdf

The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.

Author : Sebastian Beer,Ruud A. de Mooij,Ms.Li Liu
Publisher : International Monetary Fund
Page : 45 pages
File Size : 53,9 Mb
Release : 2018-07-23
Category : Business & Economics
ISBN : 9781484363997

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International Corporate Tax Avoidance: A Review of the Channels, Magnitudes, and Blind Spots by Sebastian Beer,Ruud A. de Mooij,Ms.Li Liu Pdf

This paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations. It surveys evidence on main channels of corporate tax avoidance including transfer mispricing, international debt shifting, treaty shopping, tax deferral and corporate inversions. Moreover, it performs a meta analysis of the extensive literature that estimates the overall size of profit shifting. We find that the literature suggests that, on average, a 1 percentage-point lower corporate tax rate will expand before-tax income by 1 percent—an effect that is larger than reported as the consensus estimate in previous surveys and tends to be increasing over time. The literature on tax avoidance still has several unresolved puzzles and blind spots that require further research.

Author : OECD
Publisher : OECD Publishing
Page : 212 pages
File Size : 50,5 Mb
Release : 2016-12-22
Category : Electronic
ISBN : 9789264268333

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OECD/G20 Base Erosion and Profit Shifting Project Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, Action 4 - 2016 Update Inclusive Framework on BEPS by OECD Pdf

The 2015 Report on BEPS Action 4 established a common approach which directly links an entity’s net interest deductions to its level of economic activity, based on taxable EBITDA. Further work on two aspects of the common approach was completed in 2016 and this is included in this update.

Author : OECD
Publisher : OECD Publishing
Page : 116 pages
File Size : 51,7 Mb
Release : 2015-10-05
Category : Electronic
ISBN : 9789264241176

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OECD/G20 Base Erosion and Profit Shifting Project Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, Action 4 - 2015 Final Report by OECD Pdf

Addressing base erosion and profit shifting (BEPS) is a key priority of governments. In 2013, OECD and G20 countries, working together on an equal footing, adopted a 15-point Action Plan to address BEPS. This publication is the final report for Action 4.

Author : Leora Klapper,Luc Laeven
Publisher : World Bank Publications
Page : 60 pages
File Size : 45,5 Mb
Release : 2004
Category : Business law
ISBN : 8210379456XXX

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Business Environment and Firm Entry by Leora Klapper,Luc Laeven Pdf

"Using a comprehensive database of firms in Western and Eastern Europe, we study how the business environment in a country drives the creation of new firms. Our focus is on regulations governing entry. We find entry regulations hamper entry, especially in industries that naturally should have high entry. Also, value added per employee in naturally "high entry" industries grows more slowly in countries with onerous regulations on entry. Interestingly, regulatory entry barriers have no adverse effect on entry in corrupt countries, only in less corrupt ones. Taken together, the evidence suggests bureaucratic entry regulations are neither benign nor welfare improving. However, not all regulations inhibit entry. In particular, regulations that enhance the enforcement of intellectual property rights or those that lead to a better developed financial sector do lead to greater entry in industries that do more R & D or industries that need more external finance"--National Bureau of Economic Research web site.

Author : International Monetary Fund. Fiscal Affairs Dept.
Publisher : International Monetary Fund
Page : 41 pages
File Size : 40,5 Mb
Release : 2009-12-06
Category : Business & Economics
ISBN : 9781498335928

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Debt Bias and Other Distortions by International Monetary Fund. Fiscal Affairs Dept. Pdf

Tax distortions are likely to have encouraged excessive leveraging and other financial market problems evident in the crisis. These effects have been little explored, but are potentially macro-relevant. Taxation can result, for example, in a net subsidy to borrowing of hundreds of basis points, raising debt-equity ratios and vulnerabilities from capital inflows. This paper reviews key channels by which tax distortions can significantly affect financial markets, drawing implications for tax design once the crisis has passed.

Author : Jack M. Mintz,Alfons J. Weichenrieder
Publisher : MIT Press
Page : 203 pages
File Size : 46,8 Mb
Release : 2010-08-06
Category : Business & Economics
ISBN : 9780262014496

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The The Indirect Side of Direct Investment by Jack M. Mintz,Alfons J. Weichenrieder Pdf

Drawing on a unique data set (MiDi) on German multinationals provided by the Deutsche Bundesbank in Frankfurt, Mintz and Weichenrieder confirm the prevalence of indirect financing structures for both outbound and inbound German investment. They find evidence of "treaty shopping!' to avoid withholding taxes (using a third country with more favorable tax rates as a conduit through which to route investments) and of "debt shifting." --