Conduit Entities: Implications of Indirect Tax-Efficient Financing Structures for Real Investment: Special Issue: Public Finance and Financial Markets (Guest Editor: Alfons J. Weichenrieder)

Author: Jack Mintz

Source: International Tax and Public Finance, Volume 11, Number 4, August 2004 , pp. 419-434(16)

Publisher: Springer

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Abstract:

As well known, companies shift income from high to low tax jurisdictions. Typically, profit shifting is achieved by “direct” financing structures whereby companies use debt finance in the high tax entity and equity finance in the low tax entity. However, certain tax policies can lead to “indirect” financing structures whereby a conduit entity provides an opportunity to achieve at least two deductions for interest expenses for an investment made in the host country. The effect of “direct” and “indirect” financing structures on real investment is compared.

Keywords: business taxes; multinational company finance and investment

Document Type: Research article

DOI: http://dx.doi.org/10.1023/B:ITAX.0000033986.95921.99

Affiliations: 1: J.L. Rotman School of Management, University of Toronto and the C.D. Howe Institute

Publication date: 2004-08-01