Debt and Transfer Pricing: Implications on Business Tax Policy

Nicola Comincioli, Paolo Panteghini and Sergio Vergalli

No 307307, 2030 Agenda from Fondazione Eni Enrico Mattei (FEEM)

Abstract: In this article we introduce model to describe the behavior of a multinational company (MNC) that operates transfer pricing and debt shifting, with the purpose of incrementing its value, intended as the sum of equity and debt. We compute, in a stochastic environment and under default risk, the optimal shares of profit and debt to be shifted and show how they are a effected by exogenous features of the market. In addition, by means of a numerical analysis, we simulate and quantify the benefit arising from the exploitation of tax avoidance practices and study the corresponding impact on MNC's fundamental indicators. A wide sensitivity analysis on model's parameters is also provided.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 25
Date: 2020-11-05
New Economics Papers: this item is included in nep-cmp
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https://ageconsearch.umn.edu/record/307307/files/NDL2020-016.pdf (application/pdf)

Related works:
Working Paper: Debt and Transfer Pricing: Implications on Business Tax Policy (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemgc:307307

DOI: 10.22004/ag.econ.307307

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