Tax avoidance with cross-border hybrid instruments

• 成果类型: Article
• 署名作者: Johannesen, Niels
• 署名单位: University of Copenhagen
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2014.01.011
• 发表日期: 2014
• 页码: 40-52
• 关键词: Hybrid instruments; Tax planning; Tax avoidance; corporate taxation; multinational firms; Foreign investment

摘要

The rules demarcating debt and equity for tax purposes differ between countries, hence the possibility that a hybrid financial instrument is treated as equity in one country and debt in another. This may create a scope for tax avoidance by allowing firms that invest in foreign countries to combine tax deductible interest expenses in the host country and tax favored dividend income in the home country. In this paper, we first develop a formal model of hybrid instruments and show that, for a given pair of countries, firms in at least one country and sometimes in both can avoid taxes on investment in the other country with a cross-border hybrid instrument. We then investigate why countries tend to allow the use of hybrid instruments for tax avoidance and show that even if effective anti-avoidance rules are available, there exists a global policy equilibrium in which no country uses such rules. (C) 2014 Elsevier B.V. All rights reserved.