Real Responses to Anti-Tax Avoidance: Evidence from the UK Worldwide Debt Cap
Yaxuan Qi and
No 9044, CESifo Working Paper Series from CESifo
We analyze how multinational firms reallocate real operations and debt across their affiliates in response to anti-tax avoidance policies. The UK introduced a worldwide debt cap in 2010, generating a quasi-natural experiment that limited interest deductibility for a group of multinational firms. We find that multinationals affected by the reform reduced the amount of debt held in the UK and increased debt held abroad. Affected multinationals reallocated a share of their real operations away from the UK. Our findings provide causal evidence for tax-motivated debt and real activity reallocation within multinationals and show how multinationals can circumvent tax avoidance regulations.
Keywords: debt shifting; multinational companies; capital reallocation (search for similar items in EconPapers)
JEL-codes: H25 H26 (search for similar items in EconPapers)
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Journal Article: Real responses to anti-tax avoidance: Evidence from the UK Worldwide Debt Cap (2022)
Working Paper: Real Responses to Anti-tax Avoidance: Evidence from the UK Worldwide Debt Cap (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9044
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