German Inbound Investment, Corporate Tax Planning, and Thin-Capitalization Rules – A Difference-in-Differences Approach


Overesch, Michael ; Wamser, Georg


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URL: http://ub-madoc.bib.uni-mannheim.de/1459
URN: urn:nbn:de:bsz:180-madoc-14592
Document Type: Working paper
Year of publication: 2006
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H26 H25 G32 ,
Subject headings (SWD): Deutschland / Investmentsteuergesetz , Körperschaftsteuer , Kapital , Finanzpolitik
Keywords (English): Corporate Income Tax , Multinationals , Thin-Capitalization Rule , Difference-in-Differences , Firm-Level Data
Abstract: This paper investigates tax planning behavior by means of inter-company finance and the effectiveness of fighting back 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 until 2004, supports a significant impact of tax rate differences on the use of intra-company debt. The effectiveness of the German thin-capitalization rule is tested by using legal amendments as natural experiments. The results suggest that the German thin-capitalization rule induces significantly lower intra-firm debt-levels of inbound investments. Hence, tax planning via intra-firm finance is effectively limited.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Overesch, Michael ; Wamser, Georg (2006) German Inbound Investment, Corporate Tax Planning, and Thin-Capitalization Rules – A Difference-in-Differences Approach. Open Access [Working paper]
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