Tax avoidance and vertical interlocks within multinational enterprises

Henning Giese, Reinald Koch and Markus Gamm

No 270, arqus Discussion Papers in Quantitative Tax Research from arqus - Arbeitskreis Quantitative Steuerlehre

Abstract: This study investigates to what extent multinational enterprises appoint managers jointly at the headquarter and a foreign subsidiary (vertical manager interlocks, VMIs) in order to facilitate tax planning. We use a cross-section data set taken from the AMADEUS database to show that VMIs are observed more frequently in MNEs with a higher potential for tax-induced profit shifting. We also provide evidence indicating that the implementation of VMIs is motivated by an internal principal-agent conflict arising from conflicting interests between the MNE and high-tax subsidiary managers. Finally, we show that the use of VMI structures is associated, ceteris paribus, with a lower effective tax rate.

Keywords: management structure; profit shifting; principal-agent-theory (search for similar items in EconPapers)
JEL-codes: H25 H26 M12 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-dem, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:arqudp:270

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