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A Study from Slovakia on the Transfer of Slovak Companies to Tax Havens and Their Impact on the Sustainability of the Status of a Business Entity

Samer Khouri (), Lubos Elexa (), Michal Istok () and Andrea Rosova ()
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Samer Khouri: Institute of Earth Resources, Faculty of Mining, Ecology, Process Control and Geotechnologies, Technical University of Kosice, Letna 9, 04200 Kosice, Slovakia
Lubos Elexa: Department of Corporate Economics and Managements, Faculty of Economics, Matej Bel University in Banska Bystrica, Tajovskeho 10, 975 90 Banska Bystrica, Slovakia
Michal Istok: Department of Finance and Accounting, Faculty of Economics, Matej Bel University in Banska Bystrica, Tajovskeho 10, 975 90 Banska Bystrica, Slovakia
Andrea Rosova: Institute of Logistics and Transport, Faculty of Mining, Ecology, Process Control and Geotechnologies, Technical University of Kosice, Letna 9, 04200 Kosice, Slovakia

Sustainability, 2019, vol. 11, issue 10, 1-18

Abstract: The main aim of this paper is to provide empirical evidence about profit-shifting to selected tax havens by Slovak companies. This contribution focused on the very rare evidence of use of tax havens by Slovak companies not only in the field of corporate income tax, but also in selected areas of profitability. Two sources of data were used. Lists of Slovak companies with tax haven links were provided by the company, Bisnode, and financial statements of investigated companies were gained from the Finstat database. Based on the available data, the investigated period was between 2008 and 2016. We statistically tested selected indicators (ETR, taxes per assets, ROE, ROA, and ROS) of Slovak companies with direct ownership links to tax havens compared to their counterparts. Our findings suggest that Slovak companies with an ownership link to tax havens pay significantly lower taxes compared to companies without ownership links to tax havens during the period monitored. The aggressive tax planning was not only confirmed by the significantly lower reported values of ETR and taxes per assets, but also by the lower values of ROA. On the one side, Slovak companies with ownership links to midshore tax havens had the highest values of ROE, ROA, and ROS, but on the other side, these Slovak companies reported the highest ETR among the appointed categories (onshore, midshore, and offshore). The lowest taxes paid per unit of total assets were found in Slovak companies with ownership links to onshore tax havens. The analysis was supplemented by the changes of the selected indicators before and after obtaining an ownership link to a tax haven.

Keywords: aggressive tax planning; corporate income tax (CIT); effective tax rate (ETR); profitability; profit-shifting; Slovak companies; tax haven (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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