Suchergebnisse

This paper provides empirical evidence on two potential costs of shared ownership of German affiliates abroad. First, in periods of currency crises, wholly-owned affiliates, in contrast to partially-owned affiliates, seem to circumvent financial constraints by accessing capital from their parent companies. In terms of differences in performance regarding sales of both types of firms, wholly-owned affiliates have a significantly better sales performance than partially-owned affiliates in periods of crises. This finding contributes to the evidence that FDI helps in mitigating the negative consequences of sharp currency depreciation, and stresses that this effect works especially through capital inflows to wholly-owned affiliates. Second, the debt financing of partially-owned affiliates is less sensitive to the tax rate suggesting that partially-owned affiliates rely less on international debt shifting than wholly-owned affiliates. This indicates that partially-owned affiliates are less flexible to exploit tax efficient strategies.

The Savings Directive has been celebrated as a major political break-through in coordinating taxation in Europe. Against this background, the present paper evaluates the real-world effects of this directive. The directive has left a loophole by providing grandfathering (exemption from withholding tax) for some securities. In this paper we compare the pre-tax returns of exempt bonds and comparable taxable bonds. If working around the Savings Directive is difficult for tax evaders in Europe, then investors should be willing to pay a premium for bonds that are exempt from the withholding rate. Conversely, if such a premium is absent, then we may conclude that the supply of existing loopholes (exempt bonds included) is large enough to allow tax evaders to continue evasion at no additional cost. The findings of our study are in line with this latter interpretation.

Tax neutrality towards alternative financing instruments for corporate investment is a ubiquitous demand in the political debate. At the same time, the literature is surprisingly silent about the magnitude of possible efficiency costs of a departure from tax neutrality. Against this background, the present paper discusses the theory of capital structure and provides backof-the-envelope calculations of the possible efficiency cost of a tax distortion of the debtequity decision.

By granting intracompany loans to their foreign affiliates, multinational firms may reduce their tax liability abroad. Many countries have legislated thin-capitalization rules (TCRs) that limit the allowable levels of intracompany loans or restrict interest deductibility if certain thresholds are crossed. This paper empirically analyzes the effect of the German TCR on corporate policy. We find that tightening the regulations in 2001 had some limiting effect on leverage. Foreign affiliates reacted by reducing intracompany loans and increasing equity, with no significant evidence of reduced real investment. A possible reason for the limited impact of the TCR was that multinational firms had the option to work around the regulation by using holding company structures. Indeed, holding companies have been used to shift huge amounts of intracompany loans onto the books of German affiliates. At the same time, however, only part of these observed reorganizations seem to have been a reaction to TCR.

A long-standing concern in the literature has been that household mobility implies a serious threat to the viability of redistributive taxation. This paper considers the effects of deferred integration of migrants into the redistributive system of the target country. In a model of symmetric regions, deferred integration introduces a time consistency problem into governments' tax plans which reduces a region's incentive to undercut other regions' tax rates and can bring tax competition to a halt. On the one hand, rich migrants cease to benefit from the lower tax rate in the current period. On the other hand, the region's promise of a continuing low rate in the future is not credible. We also explore the case where poor recipients of social assistance are mobile while the rich are immobile.