Profit shifting via intragroup lending: measuring and comparing the debt structure and interest rate channels

Nadia Accoto (), Federica Daniele () and Valerio Della Corte ()
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Nadia Accoto: Bank of Italy
Federica Daniele: Bank of Italy
Valerio Della Corte: Bank of Italy

No 1529, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Multinational groups can use intragroup lending to shift their profits to low-tax jurisdictions so as to minimize their tax liability. We provide novel evidence on the extent of profit shifting via intragroup lending. Our findings suggest that firms are more likely to take on a greater share of related foreign party debt than non-related foreign party debt when the multinational group they belong to has affiliates in low-tax jurisdictions; we have also found that the interest rate paid on related party debt tends to be higher than the interest rate paid to non-related counterparties. The importance of tax motivations is confirmed by the disproportionate reliance on internal borrowing from affiliates in countries listed as tax havens among firms with higher EBITDA and spare interest deductibility capacity. Finally, we try to quantify the amount of corporate tax dodged via intragroup lending in Italy over the 2013-2022 period and show that it is relatively modest overall.

Keywords: multinationals; FDI; intragroup lending; profit shifting; debt bias; transfer-pricing (search for similar items in EconPapers)
JEL-codes: F30 G30 G32 G38 H2 H25 H26 (search for similar items in EconPapers)
Date: 2026-04
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