Real responses to anti-tax avoidance : Evidence from the UK Worldwide Debt Cap

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

3 Scopus Citations
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Detail(s)

Original languageEnglish
Article number104742
Journal / PublicationJournal of Public Economics
Volume214
Online published5 Sept 2022
Publication statusPublished - Oct 2022

Abstract

We analyze how multinational firms reallocate real operations and debt across their affiliates in response to anti-tax avoidance policies. The UK introduced a worldwide debt cap in 2010, generating a quasi-natural experiment that limited interest deductibility for a group of multinational firms. We find that multinationals affected by the reform reduced the amount of debt held in the UK and increased debt held abroad. Affected multinationals reallocated a share of their real operations away from the UK. Our findings provide causal evidence for tax-motivated debt and real activity reallocation within multinationals and show how multinationals can circumvent tax avoidance regulations.1

Research Area(s)

  • Capital Reallocation, Debt Shifting, Multinational Companies

Citation Format(s)

Real responses to anti-tax avoidance: Evidence from the UK Worldwide Debt Cap. / Bilicka, Katarzyna; Qi, Yaxuan; Xing, Jing.
In: Journal of Public Economics, Vol. 214, 104742, 10.2022.

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review