Debt and Transfer Pricing: Implications on Business Tax Policy

Nicola Comincioli, Paolo Panteghini and Sergio Vergalli
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Nicola Comincioli: University of Brescia and Fondazione Eni Enrico Mattei

No 2020.16, Working Papers from Fondazione Eni Enrico Mattei

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 ected 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: Capital Structure; Default Risk; Business Taxation and Welfare (search for similar items in EconPapers)
JEL-codes: G33 G38 H25 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-cfn, nep-ore, nep-pbe and nep-rmg
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Working Paper: Debt and Transfer Pricing: Implications on Business Tax Policy (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2020.16

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