Conduit Entities: Implications of Indirect Tax-Efficient Financing Structures for Real Investment

Jack Mintz

International Tax and Public Finance, 2004, vol. 11, issue 4, 419-434

Abstract: As well known, companies shift income from high to low tax jurisdictions. Typically, profit shifting is achieved by "direct" financing structures whereby companies use debt finance in the high tax entity and equity finance in the low tax entity. However, certain tax policies can lead to "indirect" financing structures whereby a conduit entity provides an opportunity to achieve at least two deductions for interest expenses for an investment made in the host country. The effect of "direct" and "indirect" financing structures on real investment is compared.

Date: 2004
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