The Tax Elasticity Of Corporate Debt

Author : Ruud A. de Mooij
Publisher : International Monetary Fund
Page : 29 pages
File Size : 44,9 Mb
Release : 2011-04-01
Category : Business & Economics
ISBN : 9781455253340

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The Tax Elasticity of Corporate Debt by Ruud A. de Mooij Pdf

Although the empirical literature has long struggled to identify the impact of taxes on corporate financial structure, a recent boom in studies offers ample support for the debt bias of taxation. Yet, studies differ considerably in effect size and reveal an equally large variety in methodologies and specifications. This paper sheds light on this variation and assesses the systematic impact on the size of the effects. We find that, typically, a one percentage point higher tax rate increases the debt-asset ratio by between 0.17 and 0.28. Responses are increasing over time, which suggests that debt bias distortions have become more important.

Author : Ruud A. de Mooij
Publisher : Unknown
Page : 27 pages
File Size : 54,7 Mb
Release : 2011
Category : Corporations
ISBN : OCLC:763976353

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The Tax Elasticity System of Corporate Debt by Ruud A. de Mooij Pdf

Although the empirical literature has long struggled to identify the impact of taxes on corporate financial structure, a recent boom in studies offers ample support for the debt bias of taxation. Yet, studies differ considerably in effect size and reveal an equally large variety in methodologies and specifications. This paper sheds light on this variation and assesses the systematic impact on the size of the effects. We find that, typically, a one percentage point higher tax rate increases the debt-asset ratio by between 0.17 and 0.28. Responses are increasing over time, which suggests that debt bias distortions have become more important.

Author : Ruud A. de Mooij,Shafik Hebous
Publisher : International Monetary Fund
Page : 20 pages
File Size : 52,8 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 : Mr.Jost Heckemeyer,Ruud A. de Mooij
Publisher : International Monetary Fund
Page : 29 pages
File Size : 43,9 Mb
Release : 2013-10-29
Category : Business & Economics
ISBN : 9781484366790

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Taxation and Corporate Debt by Mr.Jost Heckemeyer,Ruud A. de Mooij Pdf

This paper explores whether corporate tax bias toward debt finance differs between banks and nonbanks, using a large panel of micro data. On average, it finds that there is no significant difference. The marginal tax effect for both banks and non-banks is close to 0.2. However, the responsiveness differs considerably across the size distribution and the conditional leverage distribution. For nonbanks, we find a U-shaped relationship between asset size and tax responsiveness, although this pattern does not hold universally across the conditional leverage distribution. For banks, in contrast, the tax responsiveness declines linearly in asset size. Quantile regressions show further that capitaltight banks are significantly less responsive than are capital-abundant banks; the same pattern holds for the largest non-banks. Still, even the largest banks with high conditional leverage ratios feature a significant, positive tax response.

Author : Mr.Luc Laeven,Gaetan Nicodeme,Harry Huizinga
Publisher : International Monetary Fund
Page : 39 pages
File Size : 52,7 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 : John B. Shoven,Joel Waldfogel
Publisher : Brookings Institution Press
Page : 228 pages
File Size : 49,7 Mb
Release : 2012-01-01
Category : Business & Economics
ISBN : 0815714262

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Debt, Taxes and Corporate Restructuring by John B. Shoven,Joel Waldfogel Pdf

The boom in corporate restructuring, accompanied by large increases in debt finance, was one of the most important developments in the U.S. economy in the 1980s. Financial and tax specialists analyze how the U.S. tax system-especially in its bias toward debt financing-has affected corporate financial decisions and influenced the recent wave of corporate restructuring. The authors evaluate the hypothesis that the rise in the cost of capital during the 1980s helped stimulate the surge in corporate takeovers. They analyze the effect that changes in tax laws and in the volume of government debt have had on corporate financial decisions. The authors examine how recent financial innovations have blurred the distinction between debt and equity finance.

Author : Yuri F. R. Grbich
Publisher : Unknown
Page : 295 pages
File Size : 42,7 Mb
Release : 1991
Category : Corporate debt
ISBN : 0582871794

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Taxation of Corporate Debt Finance by Yuri F. R. Grbich Pdf

Collection of 12 papers which form a guide to current rules and practices in respect of taxation of corporate finance arrangements following bank deregulation. Includes tables of cases, statutes and income tax rulings. Part of the TRevenue and Company Law Practice' series.

Author : Sebastian Beer,Ruud A. de Mooij,Ms.Li Liu
Publisher : International Monetary Fund
Page : 45 pages
File Size : 48,9 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 : Julian Ghosh,Ian Johnson,Paul Miller
Publisher : Unknown
Page : 800 pages
File Size : 44,6 Mb
Release : 2009-04-14
Category : Electronic
ISBN : 1405747145

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Taxation of Corporate Debt and Derivatives by Julian Ghosh,Ian Johnson,Paul Miller Pdf

Formerly known as Taxation of Loan Relationships and Derivatives, this publication was re-launched and fully updated in April 2009. Offering invaluable tax planning help for the tax specialist and with its easy to use subject index and cross-referencing, Taxation of Corporate Debt and Derivatives is a highly practical publication, ideal for the busy tax practitioner and lawyer. Debt and Treasury management occupies an increasing proportion of the work of tax practitioners. With considerable legislation to get to grips with, this publication, updated twice per annum, offers a concise and comprehensive version of the law in this area. This publication examines, in detail, each of the regimes involving: * Foreign exchange transactions * Financial instruments (such as options, debt contracts, currency swaps) * Corporate debt, i.e. the loan relationship provisions * Anti-avoidance provisions including thin capitalisation, funding bonds etc

Author : Julian Ghosh
Publisher : Unknown
Page : 128 pages
File Size : 49,8 Mb
Release : 2009
Category : Corporate debt
ISBN : OCLC:373476801

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Ghosh, Johnson and Miller on the Taxation of Corporate Debt and Derivatives by Julian Ghosh Pdf

Author : David Southern
Publisher : Unknown
Page : 128 pages
File Size : 54,9 Mb
Release : 2001-12-30
Category : Electronic
ISBN : 0754512193

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Taxation of Corporate Debt and Financial Instruments by David Southern Pdf

This title focuses on the practical implications of the provisions on corporate debt, financial instruments and foreign exchange gains and losses. It covers the interaction between the taxes, the accounting framework, corporate transactions and planning issues. It is a comprehensive and practical guide to the corporate and government debt rules, to the tax and accounting treatment of all instruments used in providing corporate finance, and the treatment of foreign exchange gains and losses arising from such financial transactions. Worked examples throughout illustrate complex points, and it is fully cross-referenced to the legislation and Inland Revenue pronouncements. Changes in practice and legislation up to and including the Finance Act 2001 are included.

Author : David Southern
Publisher : Unknown
Page : 497 pages
File Size : 44,7 Mb
Release : 2001
Category : Bankruptcy
ISBN : OCLC:50523087

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Tolley's Taxation of Corporate Debt and Financial Instruments by David Southern Pdf

Author : International Monetary Fund. Fiscal Affairs Dept.
Publisher : International Monetary Fund
Page : 78 pages
File Size : 43,9 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 : Pietro Dallari,Mr.Nicolas End,Fedor Miryugin,Alexander F. Tieman,Mr.Seyed Reza Yousefi
Publisher : International Monetary Fund
Page : 42 pages
File Size : 55,9 Mb
Release : 2018-12-07
Category : Business & Economics
ISBN : 9781484389102

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Pouring Oil on Fire: Interest Deductibility and Corporate Debt by Pietro Dallari,Mr.Nicolas End,Fedor Miryugin,Alexander F. Tieman,Mr.Seyed Reza Yousefi Pdf

This paper investigates the role of tax incentives towards debt finance in the buildup of leverage in the nonfinancial corporate (NFC) sector, using a large firm-level dataset. We find that so-called debt bias is a significant driver of leverage, for both small and medium-sized enterprises and larger firms, with its effect accounting for about a quarter of leverage. The strength of this effect differs with firm size, the availability of collateral, income and income volatility, cash flow, and capital intensity. We conclude that leveling the playing field between debt and equity finance through tax policy reform would decrease NFC leverage, reducing economic risks posited by leverage.

Author : Ruud A. de Mooij,Ikuo Saito
Publisher : International Monetary Fund
Page : 44 pages
File Size : 51,7 Mb
Release : 2014-08-04
Category : Business & Economics
ISBN : 9781498300094

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Japan’s Corporate Income Tax by Ruud A. de Mooij,Ikuo Saito Pdf

This paper explores how corporate income tax reform can help Japan increase investment and boost potential growth. Using international and Japan-specific empirical estimates of corporate tax elasticities, investment is predicted to expand by around 0.4 percent for each point of rate reduction. International consensus estimates suggest further that between 10 and 30 percent of the static revenue loss could be recovered in the long run through dynamic scoring, although Japan’s offset may be closer to the lower bound. Compensating fiscal measures are necessary in light of Japan’s tight fiscal constraints. The scope for base broadening in the corporate income tax is found to be limited and some forms of base broadening will undo positive investment effects of a rate cut. Alternative revenue sources include higher consumption and property taxes. A gradual approach toward lowering tax rates mitigates windfall gains and reduces short-run revenue costs. An incremental allowance-for-corporate-equity system could boost investment with limited fiscal costs in the short run.