Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Although the empirical literature has long struggled to identify the impact of taxes on corporate financial structure, a recent boom in studies offers ample support for the debt bias of taxation. Yet, studies differ considerably in effect size and reveal an equally large variety in methodologies and specifications. This paper sheds light on this variation and assesses the systematic impact on the size of the effects. We find that, typically, a one percentage point higher tax rate increases the debt-asset ratio by between 0.17 and 0.28. Responses are increasing over time, which suggests that debt bias distortions have become more important.

Corporate debt --- Corporations --- Debt --- Debt financing (Corporations) --- Econometric models. --- Finance --- Taxation --- Corporate Taxation --- Taxation, Subsidies, and Revenue: General --- Business Taxes and Subsidies --- Tax Evasion and Avoidance --- Public finance & taxation --- Corporate & business tax --- Corporate income tax --- Tax elasticity --- Tax arrears management --- Marginal effective tax rate --- Average effective tax rate --- Tax administration and procedure --- United States

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper discusses the theory and practice of tax design to achieve an efficient and equitable outcome, i.e. in support of inclusive growth. It starts with a discussion of the key principles from tax theory to guide practical tax design. Then, it elaborates on more granular tax policy, discussing key choices in the structure of the personal income tax on labor and capital income, taxes on wealth, the corporate income tax, and consumption taxes. The paper concludes by highlighting the political economy considerations of the issues with concrete recommedtions as to how to implement tax reform.

Business and Economics --- Macroeconomics --- Taxation --- Corporate Taxation --- Taxation, Subsidies, and Revenue: General --- Efficiency --- Optimal Taxation --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Tax Evasion and Avoidance --- Organizational Behavior --- Transaction Costs --- Property Rights --- Equity, Justice, Inequality, and Other Normative Criteria and Measurement --- Aggregate Factor Income Distribution --- Business Taxes and Subsidies --- Public finance & taxation --- Corporate & business tax --- Income --- Capital income tax --- Income and capital gains taxes --- Corporate income tax --- Income tax systems --- National accounts --- Taxes --- Income tax --- Corporations --- Belgium --- Economic development --- Business and Economics. --- Macroeconomics. --- Taxation. --- Corporate Taxation. --- Taxation, Subsidies, and Revenue: General. --- Efficiency. --- Optimal Taxation. --- Personal Income and Other Nonbusiness Taxes and Subsidies. --- Tax Evasion and Avoidance. --- Organizational Behavior. --- Transaction Costs. --- Property Rights. --- Equity, Justice, Inequality, and Other Normative Criteria and Measurement. --- Aggregate Factor Income Distribution. --- Business Taxes and Subsidies. --- Public finance & taxation. --- Corporate & business tax. --- Income. --- Capital income tax. --- Income and capital gains taxes. --- Corporate income tax. --- Income tax systems. --- National accounts. --- Taxes. --- Income tax. --- Corporations. --- International cooperation. --- Finance. --- Belgium.

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Tax provisions favoring corporate debt over equity finance (“debt bias”) are widely recognized as a risk to financial stability. This paper explores whether and how thin-capitalization rules, which restrict interest deductibility beyond a certain amount, affect corporate debt ratios and mitigate financial stability risk. We find that rules targeted at related party borrowing (the majority of today’s rules) have no significant impact on debt bias—which relates to third-party borrowing. Also, these rules have no effect on broader indicators of firm financial distress. Rules applying to all debt, in contrast, turn out to be effective: the presence of such a rule reduces the debt-asset ratio in an average company by 5 percentage points; and they reduce the probability for a firm to be in financial distress by 5 percent. Debt ratios are found to be more responsive to thin capitalization rules in industries characterized by a high share of tangible assets.

Corporate debt. --- Corporations --- Debt --- Debt financing (Corporations) --- Finance --- Exports and Imports --- Statistics --- Taxation --- Corporate Taxation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Business Taxes and Subsidies --- Taxation, Subsidies, and Revenue: General --- International Lending and Debt Problems --- Data Collection and Data Estimation Methodology --- Computer Programs: Other --- Public finance & taxation --- Corporate & business tax --- International economics --- Econometrics & economic statistics --- Debt bias --- Corporate income tax --- External debt --- Thin capitalization rules --- Financial statistics --- Tax policy --- Taxes --- Economic and financial statistics --- Tax administration and procedure --- Debts, External --- Double taxation --- Germany

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Unilateral adoption of transfer pricing regulations may have a negative impact on real investment by multinational corporations (MNCs). This paper uses a quasi-experimental research design, exploiting unique panel data on domestic and multinational companies in 27 countries during 2006-2014, to find that MNC affiliates reduce their investment by over 11 percent following the introduction of transfer pricing regulations. There is no significant reduction in total investment by the MNC group, suggesting that these investments are most likely shifted to affiliates in other countries. The impact of transfer pricing regulations corresponds to an increase in the ``TPR-adjusted'' corporate tax rate by almost one quarter.

Corporate Finance --- Taxation --- Corporate Taxation --- International Taxation --- Business Taxes and Subsidies --- International Fiscal Issues --- International Public Goods --- Multinational Firms --- International Business --- Taxation, Subsidies, and Revenue: General --- Public finance & taxation --- Multinationals --- Corporate & business tax --- Transnational corporations --- Transfer pricing rules --- Corporate income tax --- Transfer pricing --- Thin capitalization rules --- Economic sectors --- Taxes --- International business enterprises --- Corporations --- Double taxation --- Bosnia and Herzegovina