Tax and Nontax Incentives in Income Shifting: Evidence from Shadow Insurers

• 成果类型: Article
• 署名作者: Hepfer, Bradford F.; Wilde, Jaron H.; Wilson, Ryan J.
• 署名单位: Texas A&M University System; Texas A&M University College Station; University of Iowa; University of Oregon
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52657
• 发表日期: 2020
• 页码: 219-262
• 关键词: insurance; earnings; equity; cash; multinationals; reinsurance; management; demand; banks; rates

摘要

Using the shadow insurance setting, we study the interplay between tax and nontax incentives in income shifting. Shadow insurance involves intercompany transactions designed to help firms meet regulatory capital requirements. However, prior to the Tax Cuts and Jobs Act of 2017 (TCJA), foreign-owned life insurance firms could save taxes by using shadow insurance to shift U.S. profits to tax havens. Consistent with expectations, we find that while nontax incentives appear to be the dominant factor behind firms' use of shadow insurance, tax considerations also played a role for certain firms. We also find that shadow insurance is associated with lower liquid asset holdings and increased credit risk. Overall, our results suggest that taxes were an important incentive for foreign-owned life insurance firms to use shadow insurance pre-TCJA. Moreover, in this setting, nontax considerations appeared to have motivated U.S.-owned firms' use of tax havens.