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The Impact of Transfer Pricing Rules on Multinational Enterprises' Internal Loan
Transfer pricing rules
Transfer pricing strictness
|Issue Date: ||2018-07-24 11:02:55 (UTC+8)|
Since multinational enterprises can lower their taxable income by interest deduction in the host countries of borrowing affiliates, they have an incentive to shift profit to relative low tax rate jurisdictions through internal loan. As a result, many countries have legislated thin-capitalization rules to limit interest deduction and prevent its tax base from being eroded. However, most of the current literatures only focus on the effectiveness of thin-capitalization rules deterring internal loan and disregard the impact of interest rate transfer pricing on internal debt. Thus, this paper examines the impact of transfer pricing rules on internal debt by using affiliate level data from Taiwanese listed companies in 17 industries from 2008 to 2016. In addition, as more and more countries have legislated transfer pricing rules and have their own characteristics, this paper also attempts to explore the impact of transfer pricing strictness in different jurisdictions on internal loan.
Two Tobit random effect models in this paper are constructed by using unbalanced panel data. Model 1 is to examine whether transfer pricing rules affect internal loan between affiliates; Model 2 is further to investigate how transfer pricing strictness affect internal debt between affiliates. The results reveal that the host countries of lending and borrowing affiliates both have transfer pricing rules would decrease the amount of their internal loan; if they are tax treaty contracting states at same time, it would coordinate the potential problem of double taxation results from bilateral transfer pricing rules and increase the amount of internal debt. Finally, the stricter transfer pricing rules in host countries of borrowing affiliates would bring certainty to funding arrangement of multinational enterprises and increase its dependence on internal debt.
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|Source URI: ||http://thesis.lib.nccu.edu.tw/record/#G1052550241|
|Data Type: ||thesis|
|Appears in Collections:||[財政學系] 學位論文|
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