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Nutzen deutsche Konzerne Belgien als Finanzierungsstandort?: Eine Fallstudie
Abstract
Belgien ermöglicht es Unternehmen einen Eigenkapital-Zinsaufwand steuerlich zu berücksichtigen. Dies eröffnet multinationalen Konzernen die Möglichkeit, Gewinne in belgische Finanzierungsgesellschaften zu verlagern und dort praktisch zum Nulltarif zu versteuern. Diese Fallstudie stellt zunächst dar, wie eine solche Finanzierungsgesellschaft aufgesetzt werden kann. Anschließend wird mittels eines einzigartigen Datensatzes untersucht, inwieweit DAX und MDAX Konzerne Steuerplanung mittels Finanzierungsgesellschaften in Belgien betreiben. Es werden sieben Finanzierungsgesellschaften identifiziert; sieben weitere Konzerne betreiben möglicherweise eine operativ tätige Finanzierungsgesellschaft. In einem weiteren Schritt wird approximiert, dass jährlich Gewinne in Höhe von 914 Mio. € verlagert und dadurch Steuern in Höhe von 179–242 Mio. € gespart werden. Für diesen Datensatz wird ein Steueraufkommensverlust für Belgien aufgrund des Eigenkapital-Zinsaufwands in Höhe von 11–36 Mio. € jährlich geschätzt.
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This paper reviews the experiences of Belgium and Italy with ACE-type systems of
corporate taxation. The comparison focusses on the definition of the base for the computation of the
allowance and the anti-avoidance framework to tackle abuses. It is argued that the Italian system, with
its incremental feature and a comprehensive anti-avoidance framework targeting transactions between
related parties, seems a more viable solution for an ACE reform aimed at addressing the debt bias in
the corporate sector.
This article 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.
The paper considers profit shifting behavior using data on German inbound and outbound FDI. It finds an empirical correlation
between the home country tax rate of a parent and the net of tax profitability of its German affiliate that is consistent
with profit shifting behavior. For profitable affiliates that are directly owned by a foreign investor the evidence suggests
that a 10-percentage point increase in the parent’s home country tax rate leads to roughly half a percentage point increase
in the profitability of the German subsidiary. On the outbound side of German FDI, the data provides some evidence that tax
rate changes in the host country lead to a stronger change in after-tax profitability for affiliates that are wholly owned,
which may reflect the larger flexibility of these firms in carrying out tax minimizing behavior without interference of minority
owners.
The paper analyzes the financial structure of outbound FDI during the period 1996-2002 by drawing on up to 54,022 firm-year observations of 13,758 German-owned subsidiaries. We find that the tax rate in the host country has a sizeable and significantly positive effect on leverage for wholly-owned foreign unlike partially-owned foreign companies. Most of the effect comes from increased intra-company borrowing, while third-party debt is not significantly affected by tax differences. While wholly-owned subsidiaries react more sensitively to tax rate differentials, they are less sensitive to macroeconomic influences like interest rates.
This paper shows that a reduction in tax discrimination between debt and equity funding leads to better capitalized financial institutions. The paper exploits exogenous variation in the tax treatment of debt and equity created by the introduction of a tax shield for equity. The results demonstrate that a more equal treatment of debt and equity increases bank capital ratios, driven by an increase in common equity. The change also leads to a significant reduction in risk taking for ex-ante low capitalized banks. Overall, the findings suggest that tax shields could be a valuable and innovative policy tool for bank regulators.
Theory recommends aligning the tax treatment of debt and equity. A few countries, notably Belgium, have introduced an allowance for corporate equity (ACE) to achieve tax neutrality. We study the effects of adopting an ACE on debt financing, passive investment, and active investment of multinational firms, using high-quality administrative data on virtually all German-based multinationals. We use two main identification strategies, based on: (1) synthetic control methods, and (2) variations across affiliates within the multinational group. Our results suggest that an ACE reduces the corporate debt ratio of multinational affiliates. Additionally, an ACE increases intra-group lending and other forms of passive investment but has no effects on production investment of multinational affiliates. The findings indicate that a unilateral implementation of an ACE system generates a tax planning opportunity using a structure combining the benefits from the ACE with interest deductions.
This paper discusses the issue of profit shifting and ‘aggressive’ tax planning by multinational firms. The paper makes two contributions. Firstly, we provide some background information to the debate by giving a brief overview over existing empirical studies on profit shifting and by describing arrangements for IP-based profit shifting which are used by the companies currently accused of avoiding taxes. We then show that preventing this type of tax avoidance is, in principle, straightforward. Secondly, we argue that, in the short term, policy makers should focus on extending withholding taxes in an internationally coordinated way. Other measures which are currently being discussed, in particular unilateral measures like limitations on interest and license deduction, fundamental reforms of the international tax system and country-by-country reporting, are either economically harmful or need to be elaborated much further before their introduction can be considered.
This paper discusses the issue of profit shifting and "aggressive" tax planning by multinational firms. The paper makes two contributions. First, it provides some background information to the debate by giving a brief overview of existing empirical studies on profit shifting and by describing arrangements for IP-based profit shifting which are used by the companies currently accused of avoiding taxes. We then show that preventing this type of tax avoidance is, in principle, straightforward. Second, we argue that, in the short term, policy makers should focus on extending withholding taxes in an internationally coordinated way. Other measures which are currently being discussed, in particular unilateral measures, like limitations on interest and license deduction, fundamental reforms of the international tax system and country-by-country reporting, are either economically harmful or need to be elaborated much further before their introduction can be considered.
In their famous Mirrlees review (2011) on reforming the tax system for the 21st century, the authors put forward the introduction of an allowance for corporate equity regime. In recent years, several countries introduced an ACE regime. The main feature of an ACE regime is that it removes tax distortions on marginal investment and finance distortions. Yet, by narrowing the tax base an ACE regime potentially requires an increase in tax rates which might affect location choices and profit shifting activity negatively. In this paper, we employ a microsimulation model to determine the consequences of introducing an ACE regime in Germany. The simulation results show that granting an ACE for corporate income tax purposes results in a revenue loss of about 18%. This could be financed by an increase of the combined profit tax rate by 6 percentage points. At firm level, our analysis illustrates the heterogeneous distribution of the reform effect accross the sample. For 50% of firms between the 25th and 75th percentile, introducing an ACE regime reduces tax payments between 35% and 2%. If the ACE is combined with a tax rate adjustment, the tax effect ranges between -32% and 7.1% for firms between the 25th and 75th percentile. With respect to behavioural responses on decision margins, we find that introducing the ACE reduces the mean debt-ratio by about 1.5 percentage points in the short run. For the capital-stock we arrive at a mean short-term increase of 2.4%. Finally, our computations show that the ACE regime with adjusted profit tax rate cannot be overall tax neutral. In particular, the increase in the profit tax rate required to finance the equity allowance induces intensified outward profit-shifting activities and affects location choices negatively. In the short-run the tax revenue is therefore shown to decline to about 95% of its original level.
In trying to explain the drivers of global profit shifting by multinational enterprises (MNEs), we investigate firm-specific determinants and their variation across major industries. Using the ORBIS database, we show that intangible asset endowment of subsidiaries and the supply-chain complexity of MNE groups explain aggregate profit-shifting trends. According to our estimates, subsidiaries with no intangibles react to an incremental increase of the tax rate by reducing reported profits by 0.76 %, while subsidiaries with above median intangible endowment decrease their profits by 1.2 %. This difference is significant at the 5 % level. We find an even more pronounced difference in the observed semi-elasticities comparing affiliates belonging to simple ( \(-\) 0.52) and more complex MNEs ( \(-\) 1.92), suggesting a significantly larger sensitivity to CIT rate changes of the latter group. Moreover, we incorporate country-specific transfer pricing mitigation measures (documentation requirements) into our analysis. We find significant mitigation effects, which vary depending on the drivers identified in our analysis. On average, estimated profit shifting among MNE subsidiaries in our sample is reduced by 52 % 2 years after the introduction of mandatory documentation requirements. We do, however, not find a significant effect on affiliates with high intangible endowments, whereas documentation reduces profit shifting of subsidiaries within complex MNE groups. Our analysis suggests that complexity poses less of a challenge to effective domestic enforcement than the appropriate pricing of intangible assets. These findings thus provide additional insights on profit-shifting risks and mitigation effects conditional on firm attributes, which may support the design of anti-avoidance approaches and help guide the allocation of scarce analytical and enforcement resources.
This paper provides a quantitative review of the empirical literature on profit-shifting behavior of multinational firms. We synthesize the evidence from 25 studies and find a substantial response of profit measures to international tax rate differentials. Accounting for misspecification biases by means of meta-regressions, we predict a tax semi-elasticity of subsidiary pre-tax profits of about 0.8. Moreover, we disentangle the tax response by means of financial planning from the transfer pricing and licensing channel. Our results suggest that transfer pricing and licensing are the dominant profit-shifting channel.
This paper analyzes the effectiveness of limitations of the tax deductibility of interest expenses for multinational corporations, so-called thin-capitalization rules. The empirical investigation exploits a large micro-level panel dataset of multinational firms to analyze the effects of thin-capitalization rules on the capital structure of foreign subsidiaries located in OECD countries in the time period between 1996 and 2004. The findings indicate that thin-capitalization rules effectively reduce the incentive to use internal loans for tax planning but result in higher external debt.
In this paper, I use difference-in-differences regressions to measure how the debt tax shield affects the capital structure of a company. By comparing the financial leverage of treatment and control companies before and after the introduction of an equity tax shield, I infer the impact of the tax discrimination between debt and equity. Consistent with the theoretical prediction, the estimated results show that the introduction of an equity tax shield has a significant negative effect on the financial leverage of a company. This effect amounts to approximately 2-7%, meaning that a classical tax system encourages companies to use on average 2-7% more debt than when there is an equal tax treatment of debt and equity.
This paper analyzes the capital structures of foreign affiliates and internal capital markets of multinational corporations. Ten percent higher local tax rates are associated with 2.8% higher debt/asset ratios, with internal borrowing being particularly sensitive to taxes. Multinational affiliates are financed with less external debt in countries with underdeveloped capital markets or weak creditor rights, reflecting significantly higher local borrowing costs. Instrumental variable analysis indicates that greater borrowing from parent companies substitutes for three-quarters of reduced external borrowing induced by capital market conditions. Multinational firms appear to employ internal capital markets opportunistically to overcome imperfections in external capital markets.
While the existence of outward profit shifting within multinationals at the expense of Germanys national tax revenue is a well-established fact, the exact volume of such activities is at the heart of an ongoing political and academic debate. This article thoroughly analyses the most prominent and most daring of all circulating estimates, a study recently published by the German Institute for Economic Research (DIW). We reveal its shortcomings and in return present new estimates. Corresponding tax policy implications will also be pointed out.
The capital structure of foreign affiliates is analyzed using a large panel of German multinationals. While taxes are found to encourage debt finance in general, adverse local credit market conditions result in lower external borrowing but higher internal debt indicating that the two channels of debt finance are substitutes.
In this paper, we examine the effect of the corporation income tax on the investment decision of the firm particularly with respect to the role of interest and depreciation deductions in determining the neutrality of the tax. We demonstrate the need for introducing a constraint on corporate borrowing before a meaningful analysis of the firm's behaviour under certainty is possible. The effect of a given tax and deduction scheme on the firm's investment decision is found to depend on the form of this constraint. We then relate our results to that of earlier authors and indicate some problems with their analyses.
This paper presents a model of a multinational firm's optimal debt policy that incorporates international taxation factors. The model yields the prediction that a multinational firm's indebtedness in a country depends on a weighted average of national tax rates and differences between national and foreign tax rates. These differences matter as multinationals have an incentive to shift debt to high-tax countries. The predictions of the model are tested using a novel firm-level dataset for European multinationals and their subsidiaries, combined with newly collected data on the international tax treatment of dividend and interest streams. Our empirical results show that a foreign subsidiary's capital structure reflects local corporate tax rates as well as tax rate differences vis-à-vis the parent firm and other foreign subsidiaries, although the overall economic effect of taxes on leverage appears to be small. Ignoring the international debt shifting arising from differences in national tax rates would understate the impact of national taxes on debt policies by about 25%.
We model the opportunities and incentives generated by international tax differences for international profit shifting by multinationals. The model considers not only profit shifting arising from international tax differences between affiliates and parent companies, but also from tax differences between affiliates in different host countries. Our model yields the prediction that a multinational's profit shifting in a country depends on a weighted average of international tax rate differences between all countries where the multinational is active. Using a unique dataset containing detailed firm-level information on the parent companies and subsidiaries of European multinationals and information about the international tax system, we test our model and empirically examine the extent of intra-European profit shifting by European multinationals. On average, we find a semi-elasticity of reported profits with respect to the top statutory tax rate of 1.3, while shifting costs are estimated to be 0.6% of the tax base. International profit shifting leads to a substantial redistribution of national corporate tax revenues. Many European nations appear to gain revenues from profit shifting by multinationals largely at the expense of Germany.
Abstract The paper evaluates the working of German CFC rules that restrict the use of foreign subsidiaries located in low-tax countries to shelter passive investment income from home taxation. While passive investments make up a significant fraction of German outbound FDI, we find that German CFC rules are quite effective in restricting investments in low-tax jurisdictions. We find evidence that the German 2001 tax reform, which unilaterally introduced exemption of passive income in medium- and high-tax countries, has led to some shifting of passive assets into countries for which the exemption was previously limited.
Ce texte évalue l’impact des règles imposées aux succursales à l’étranger des sociétés allemandes – règles qui limitent l’usage de filiales étrangères localisées dans des pays à fiscalité légère pour mettre les revenus d’investissement passif à l’abri de la fiscalité dans le pays d’origine. Ces investissements passifs constituent une fraction significative de l’investissement direct à l’étranger des Allemands, et on découvre que les règles allemandes sont très efficaces pour restreindre les investissements dans des économies à fiscalité légère. Les résultats montrent que la réforme fiscale allemande de 2001, qui a unilatéralement introduit une exemption du revenu passif dans les pays à fiscalité médium or lourde, a entraîné un déplacement des actifs passifs vers les pays pour lesquels l’exemption était limitée auparavant.
A simple and general means of levying a business tax that is ‘neutral’ in the sense that it does not affect the firm's decisions at the margin is discussed. In particular, we analyze the effect of a business tax of our design on the investment decision of the firm. The well-known ‘imputed income’ and ‘immediate write-off’ methods of levying a neutral business tax are found to be special cases of our general tax design. The implication of our results is that a neutral ‘pure profits’ tax can be levied without the informational difficulties of the imputed income method or the cash flow disadvantages of the immediate write-off method.
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