NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Valeria Merlo

ETH Zurich
Department of Management,
Technology, and Economics
Weinbergstrasse 35
8092 Zurich, Switzerland

E-Mail: merlo@kof.ethz.ch

NBER Working Papers and Publications

September 2012Corporate Taxes and Internal Borrowing within Multinational Firms
with Peter Egger, Christian Keuschnigg, Georg Wamser: w18415
This paper develops a theoretical model of multinational firms with an internal capital market. Main reasons for the emergence of such a market are tax avoidance through debt shifting and the existence of institutional weaknesses and financial frictions across host countries. The model serves to derive hypotheses regarding the role of local versus foreign characteristics such as profit tax rates, lack of institutional quality, financial underdevelopment, and productivity for internal debt at the level of a given foreign affiliate. The paper assesses hypotheses in a panel data-set covering the universe of German multinational firms and their internal borrowing. Numerous novel insights are gained. For instance, the tax-sensitivity found in this paper is many times higher than previous resear...

Published:

June 2012Corporate Taxes and Internal Borrowing within Multinational Firms
with Peter Egger, Christian Keuschnigg, Georg Wamser
in Business Taxation (Trans-Atlantic Public Economics Seminar), Michael Devereux and Roger Gordon, organizers
 
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