Immobilizing Corporate Income Shifting: Should It Be Safe to Strip in the Harbor?

Dirk Steffen Schindler, Thomas Gresik, Dirk Schindler and Guttorm Schjelderup
Authors registered in the RePEc Author Service: Dirk Schindler

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: Many subsidiaries can deduct interest payments on internal debt from their taxable income. By issuing internal debt from a tax haven, multinationals can shift income out of host countries through the interest rates they charge and the amount of internal debt they issue. We show that, from a welfare perspective, thin-capitalization rules that restrict the amount of debt for which interest is tax deductible (safe harbor rules) are inferior to rules that limit the ratio of debt interest to pre-tax earnings (earnings stripping rules), even if a safe harbor rule is used in conjunction with an earnings stripping rule.

JEL-codes: H25 H26 K34 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-law and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Immobilizing corporate income shifting: Should it be safe to strip in the harbor? (2017)
Working Paper: Immobilizing Corporate Income Shifting: Should it be Safe to Strip in the Harbour? (2015)
Working Paper: Immobilizing Corporate Income Shifting: Should It Be Safe to Strip in the Harbor? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc16:145477

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