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Assessing the Tax Benefits of Hybrid Arrangements — Evidence from the Luxembourg Leaks

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  • Inga Hardeck
  • Patrick U. Wittenstein

Abstract

Using the Luxembourg Leaks database, we study how multinational firms avoid taxes via hybrid arrangements and assess their corresponding tax benefits. Confidential tax rulings included in this database enable us to deduce and classify the tax arrangements that 123 firms implemented by means of conduit entities in Luxembourg. Based on a difference-in-differences methodology, we show that hybrid arrangements are related to substantial and continuous effective tax rate reductions. These results hold under several robustness checks. Overall, our paper is one of the first to provide empirical support for the considerable benefits of hybrid arrangements outlined in prior theoretical research.

Suggested Citation

  • Inga Hardeck & Patrick U. Wittenstein, 2018. "Assessing the Tax Benefits of Hybrid Arrangements — Evidence from the Luxembourg Leaks," National Tax Journal, National Tax Association;National Tax Journal, vol. 71(2), pages 295-334, June.
    • Handle: RePEc:ntj:journl:v:71:y:2018:i:2:p:295-334
    DOI: 10.17310/ntj.2018.2.04
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    Cited by:

    1. Johannesen, Niels, 2022. "The global minimum tax," Journal of Public Economics, Elsevier, vol. 212(C).
    2. Nesbitt, Wayne L. & Outslay, Edmund & Persson, Anh V., 2023. "A reexamination of investors' reaction to tax shelter news: Evidence from the Luxembourg tax leaks," Journal of Accounting and Economics, Elsevier, vol. 75(2).
    3. Damgaard, Jannick & Elkjaer, Thomas & Johannesen, Niels, 2024. "What is real and what is not in the global FDI network?," Journal of International Money and Finance, Elsevier, vol. 140(C).
    4. Manon Francois & Vincent Vicard, 2023. "Tax Avoidance and the Complexity of Multinational Enterprises," Working Papers 2023-04, CEPII research center.
    5. Hebous, Shafik & Johannesen, Niels, 2021. "At your service! The role of tax havens in international trade with services," European Economic Review, Elsevier, vol. 135(C).

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