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Escape clauses, where small firms are exempt from particular tax rules, is a crucial feature of a number of corporate tax schemes, but creates incentives to avoid taxation by manipulating the measures that determine inclusion. We evaluate the impact of thin capitalization rules, which commonly feature such escape clauses, by exploiting the introduction of these rules in Norway in 2014. Combining difference-indifferences, regression discontinuity and bunching estimates, we show that what appears to be a strong response in the capital structure among exposed firms primarily reflect within-group reallocation of debt to avoid exposure to the rules through escape clauses. We observe sharp bunching among both new and existing subsidiaries at both thresholds for rule inclusion, and find that internal corporate group debt is offloaded to these bunching subsidiaries in order to avoid additional tax costs. As a result, significant and large effects on firm-level capital structure in response to the thin capitalization rules is driven by reshuffling of capital within corporate groups with little real effects. Re-estimating the difference-indifference specification at the corporate group level confirms this finding, questioning the extent to which thin capitalization rules have the intended effect due to the presence of escape clauses.

We study the link between a country’s institutional quality in tax collection and its optimal corporate tax policies in a model of heterogeneous multinationals that can shift income using both debt and transfer prices. Countries with weak institutional quality can be made worse off adopting policies that attract FDI as the benefits from higher wages and production are more than offset by tax base erosion. Countries with moderate institutional quality can gain from under-utilizing their ability to collect taxes, since the benefit of attracting more FDI outstrips the benefit of increased tax revenue. Countries with very strong institutions benefit from FDI and should utilize their full ability to collect taxes.

The use of tax havens by multinational corporations (MNCs) has attracted increasing attention and scrutiny in recent years. This paper provides an exposition of the academic literature on this topic. It begins with an overview of the basic facts regarding MNCs' use of havens, which are consistent with the location of holding companies, intellectual property, and financial activities in havens. However, there is also evidence of significant frictions that limit MNCs' use of havens. These limits can be attributed to nontax frictions (such as the legal and business environment in different jurisdictions), to tax law provisions limiting profit shifting, and to the costs of tax planning. There is evidence consistent with the relevance of each of these channels. The paper also argues that nonhaven countries have available a range of powerful tax law instruments to neutralize the impact of MNCs' use of havens. To the extent that it is not due to political dysfunction, their failure to deploy these instruments more extensively can be viewed as a deliberate policy choice, attributable either to collective action problems among nonhavens or to the possibility that in certain circumstances MNCs' use of havens increases the welfare of nonhaven countries. In either case, MNCs' use of havens is facilitated in crucial respects by the laws of nonhaven countries. Finally, the paper discusses how the distinction commonly drawn in public finance theory between "tax avoidance" and "behavioral responses to taxation" can illuminate current debates about the magnitude and implications of MNCs' profit shifting to havens.

Thin capitalization rules limit firms' ability to deduct internal interest payments from taxable income, thereby restricting debt shifting activities of multinational firms. Since multinational firms can limit their tax liability in several ways, regulation of debt shifting may have an impact on other profit shifting methods. We therefore provide a model under which a multinational firm can shift profits out of a host country by issuing internal debt from an entity located in a tax haven and by manipulating transfer prices on internal goods and services. The focus of this paper is the analysis of regulatory incentives, (ii) if a multinational firm treats debt shifting and transfer pricing as substitutes or (i) if the methods are not directly connected. The results provide an explanation for why hybrid thin capitalization rules are used. These insights can add to the existing literature since the results explain why hybrid rules can result in improvements in welfare if multinational firms treat methods of profit shifting as substitutes.

RESUMEN: En la presente tesis se analiza la problemática referida, tanto desde el punto de vista económico como jurídico, al objeto de extraer determinadas conclusiones que nos permitan responder, principalmente, a dos cuestiones. En primer lugar, determinar si el sistema normativo anti erosión de bases imponibles mediante el uso de los gastos financieros implementado en nuestro país (configurado por la norma general y otras de carácter específico antes citadas) busca la neutralidad en la tributación de la financiación propia versus ajena o, por el contrario, su finalidad es estrictamente recaudatoria y no incentiva a las empresas a buscar estructuras financieras equilibradas entre ambos tipos de fuentes. En segundo lugar se trata de ver si este conjunto normativo vigente en territorio común se adapta a las recomendaciones de la OCDE y compararlo con el instrumentado en los territorios históricos del País Vasco y con el aplicable en los países de nuestro entorno que tienen establecidas limitaciones a la deducibilidad de los gastos financieros. La estructura de la tesis es la siguiente: En el Capítulo 1, se analizan pormenorizadamente las normas de limitación de la deducibilidad de los gastos financieros vigentes territorio común antes y después de la promulgación del Real Decreto-Ley 12/2012. En el Capítulo 2, dado el carácter concertado del Impuesto sobre Sociedades en la normativa foral, se aborda el estudio detallado de las normas vigentes en los tres territorios que conforman el País Vasco, así como el aplicable en la Comunidad Foral de Navarra. En el Capítulo 3, se detallan y aclaran los conceptos de instrumento de patrimonio y de deuda conforme a la normativa y a la interpretación de la misma contenida en los diversos pronunciamientos judiciales a tal efecto. El Capítulo 4, se dedica a la revisión de los estudios realizados y de las conclusiones obtenidas en el marco de desarrollo de la acción 4 del proyecto BEPS emprendido en el seno de la OCDE En el capítulo 5, se realiza un estudio de las normas anti elusión de limitación de la deducibilidad de los gastos financieros, generales y específicas, implementadas en cuarenta países diferentes, incluyendo los pertenecientes a la Unión Europea, al Espacio Económico Europeo, los denominados BRICS y otros pertenecientes a la OCDE. En el Capítulo 6, se realiza un ejercicio empírico consistente en la aplicación de la norma general del coeficiente fijo a una amplia muestra de empresas a fin de determinar, el número de sociedades afectadas, el efecto de la norma en la limitación de la deducibilidad de sus gastos financieros, la evolución antes y después de la entrada en vigor de la norma de las estructuras financieras de las empresas sometidas a la misma y, por último, efectuar una comparación de la regla del coeficiente fijo vigente en el territorio común y de la norma de subcapitalización aún vigente en el territorio foral. La tesis finaliza con el Capítulo 7 que resume las conclusiones que se desprenden del trabajo. Adicionalmente, se recogen las referencias bibliográficas y se adjuntan varios anexos donde se detallan algunos aspectos de la investigación. ABSTRACT: This thesis analyze the problem related to the limitation of the deductibility of interest expense in the corporate income tax in Spain. The problem is analyzed, both economically and legally, in order to draw some conclusions that allow us to respond to two main issues. Firstly, to determine if the regulatory system to fight the erosion of the tax base through the use of financial expenses implemented in our country (established by the fixed ratio rule and others specific characteristics) seeks the neutrality between self-financing and borrowings or, on the contrary, its purpose is strictly to increase tax collection; and secondly, if this rule encourages the companies to seek balanced financial structures between the two types of financial sources. Thirdly, we wonder if the rules in the common territory are consistent with the recommendations of the OECD and we compare it with the existing rules in the Basque Provinces and in certain countries which apply the limitations established for the deductibility of interest expense. The structure of the thesis is as follows: In Chapter 1, we examine in detail the rules that limit the deductibility of the interest’s expenses existing in common territory before and after the enactment of R.D. 12/2012. In Chapter 2, as the provincial legislation of the corporate income tax is different, we analyze the rules existing in the three provinces of the Basque Country, as well as those applicable in Navarra. In Chapter 3, we attempt to clarify the concepts of equity and debt instruments in accordance with the regulations and the interpretation thereof contained in the various administrative and judicial pronouncements. In Chapter 4 is devoted to the review of the studies and the results obtained during the development of Action 4 of the BEPS project undertaken within the OECD. In Chapter 5, we study the general and specific rules about the limitation of the deductibility of financial expenses implemented in forty different countries, including those belonging to the European Union, the European Economic Area, The BRICS and other OECD countries. In Chapter 6, a consistent empirical exercise is done. First, we apply the fixed coefficient rule to a large sample of firms affected by limitations on the deductibility of interest expenses; second, we revise the evolution of financial structures before and after the entry into force of regulation of the financial structures of the companies subject to it; and, finally, we compare the differential effect of fixed coefficient rule currently applicable in the common territory and the thin capitalization rule still in force in the country Basque. The thesis concludes with the Chapter 7 that summarizes the conclusions. Moreover, the references are collected and attached several annexes where some aspects of the investigation are detailed.

Dissertação de mestrado em Direito dos Negócios, Europeu e Transnacional, This research first addresses the different tax treatment that is given to debt and equity financing, showing that the benefits associated with debt make this source of financing more attractive. The different treatment of these two forms of finance incentivizes debt exploitation, by which deductibility of interest payments decreases the tax base in a high-tax jurisdiction, preferably ending up in a low-tax jurisdiction’s tax base. This project shows that the deductibility of interest for tax purposes combined with the existence of a myriad of different tax systems leads to a number of possibilities for tax arbitrage, especially through international debt-shifting and hybrid financial instruments. It then demonstrates that the most popular response given by countries to mitigate this debt bias problem has been the adoption of thin capitalization rules which are aimed at limiting the deduction of interest that is deemed excessive. This research intends to look at these rules in the context of the OECD, tax treaties and EU law. The work presented concludes by providing two alternatives (the ACE and the CBIT systems) in order to achieve more neutrality between debt and equity., Esta pesquisa começa por abordar o diferente tratamento fiscal que é dado à dívida e à equidade, mostrando que os benefícios associados com a dívida tornam esta fonte de financiamento mais atractiva. A diferença de tratamento entre estas duas formas de financiamento incentiva a exploração da dívida, através da qual a dedutibilidade de juros diminui a base tributária numa jurisdição de alta tributação, de preferência terminando numa jurisdição que aplique baixas taxas de imposto. Este projeto mostra que a dedutibilidade de juros para efeitos fiscais, combinada com a existência de uma miríade de diferentes sistemas fiscais, leva a uma série de possibilidades para arbitragem fiscal, especialmente através do deslocamento da dívida a nível internacional e de instrumentos financeiros híbridos. É, seguidamente, demonstrado que a resposta mais popular dada pelos países para atenuar este problema de recurso excessivo ao financiamento por endividamento tem sido a adopção de regras de subcapitalização, que visam limitar a dedução dos juros considerada excessiva. Esta pesquisa pretende analisar estas regras no contexto da OCDE, dos tratados fiscais internacionais e da legislação Europeia. Na sua parte final, este trabalho oferece duas alternativas (os sistemas CBIT e ACE) com vista a alcançar mais neutralidade entre as duas formas de financiamento.

By introducing controlled-foreign-company (CFC) rules, the parent country of a multinational firm reserves the right to tax the income of the firm's foreign affiliates if the tax rate in the affiliate's host country is below a specified threshold. We identify the conditions under which binding CFC rules are part of the optimal tax mix when governments can set the statutory tax rate, a thin capitalization rule and the CFC rule. We also analyze the effects of economic and financial integration on the optimal policy mix. Our results correspond to the actual development of anti-avoidance rules in OECD countries.

From a tax planner's point of view, it is often attractive to choose debt over equity financing. As this has led to an increase of debt financing of corporations, many countries have introduced thin capitalization rules to secure their tax revenues. We analyze the influence of section 8a of the German Corporate Tax Code on corporate capital structure decisions. Furthermore, the impact of the new interest barrier is taken into consideration. The existence of the Miller equilibrium as well as definite financing effects depend significantly on the fraction of long-term debt, of substantial shareholders and when capital gains are realized.

On the basis of a substantial reduction of the corporate tax rate and the introduction of a preferential tax rate for retained profits for partnerships German tax reform act 2008 aims to improve the attractiveness of Germany for investment purposes. Furthermore a final withholding tax at a rate of 25 % for capital income shall be introduced. In order to limit revenue losses the reform involves a broader tax base. Unfortunately, tax base broadening ignores fundamental principles of income taxation and will therefore cause tax induced distortions, a considerably complication of German tax law and a substantial increase of tax planning activities. As a result of the final withholding tax, that creates considerable tax rate differences in favour of interest income, firms will substitute debt for equity. Therefore German tax reform act 2008 fails to support entrepreneurial equity despite the preferential taxation of retained profits as well as the introduction of an interest stripping rule. Die Unternehmensteuerreform 2008 zielt darauf ab, die Attraktivität des Standortes Deutschland und die unternehmerische Eigenkapitalausstattung zu verbessern. Dies soll durch Steuersatzsenkungen für Kapitalgesellschaften und die Einführung einer Thesaurierungsbegünstigung für Personenunternehmen erreicht werden. Zudem ist eine 25%ige Abgeltungsteuer für Kapitaleinkommen geplant. Diese tariflichen Steuerentlastungen sollen größtenteils durch eine Verbreiterung der Bemessungsgrundlage gegenfinanziert werden. Mit der Unternehmensteuerreform 2008 verabschiedet sich die Einkommensbesteuerung in Deutschland von dem Leitbild der synthetischen Einkommensbesteuerung und dem Nettoprinzip der Besteuerung. Verstöße gegen die steuerliche Gleichmäßigkeit und mangelnde Effizienz der Besteuerung sind die Folge. Darüber hinaus ist eine erhebliche Komplizierung des Steuerrechts zu beklagen. Beträchtliche Verzerrungen wird die geplante Abgeltungsteuer bewirken. Sie diskriminiert aufgrund des erheblichen Steuersatzgefälles zugunsten von Zinseinkommen massiv die unternehmerische Eigenkapitalbildung und wird Steuergestaltungen in erheblichem Ausmaß nach sich ziehen. Aufgrund der Abgeltungsteuer in der vorliegenden Form wird der Gesetzgeber das von ihm verfolgte Ziel einer Stärkung der unternehmerischen Eigenkapitalbasis - trotz der Thesaurierungsbegünstigung für Kapitalgesellschaften und Personenunternehmen sowie der Einführung einer Zinsschranke - nicht erreichen.