Corporate tax planning and thin-capitalization rules: evidence from a quasi-experiment

Overesch, Michael; Wamser, Georg

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@article{ Overesch2010,
 title = {Corporate tax planning and thin-capitalization rules: evidence from a quasi-experiment},
 author = {Overesch, Michael and Wamser, Georg},
 journal = {Applied Economics},
 number = {5},
 pages = {563-573},
 volume = {42},
 year = {2010},
 doi = {https://doi.org/10.1080/00036840701704477},
 urn = {https://nbn-resolving.org/urn:nbn:de:0168-ssoar-242033},
 abstract = {This paper investigates tax-planning behaviour by means of inter-company finance and the effectiveness of government countermeasures via thin-capitalization rules. A simple theoretical model which considers the financing decision of a multinational company is used to obtain empirical implications. The empirical analysis, based on German inbound investment data from 1996 to 2004, confirms a significant impact of tax-rate differentials on the use of inter-company debt. The effectiveness of the German thin-capitalization rule is tested by using legal amendments as natural experiments. The results suggest that thin-capitalization rules induce significantly lower internal borrowing. Hence, tax planning via internal finance is effectively limited by thin-capitalization rules.},
}