Do earnings stripping rules hamper investment? Evidence from CIT reforms in European countries

Anna Leszczyłowska and Jan-Hendrik Meier

Economics Letters, 2021, vol. 200, issue C

Abstract: Earnings stripping rules (ESRs) aim at curbing companies’ tax-motivated use of debt. Based on heterogeneous regulations introduced in seven European countries, we find that these rules adversely affect corporate investment. The adverse investment effect is observed when ESRs restrict total debt as well as when they apply to related-party debt. However, the magnitude of this effect varies across countries and types of investment — in tangible and intangible assets.

Keywords: Corporate income tax; Earnings stripping rules; Interest limitation rules; Thin capitalization; Investment (search for similar items in EconPapers)
JEL-codes: H25 H32 K34 M41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:200:y:2021:i:c:s0165176521000203

DOI: 10.1016/j.econlet.2021.109743

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