Author
Abstract
Companies often favor debt financing over equity financing due to its tax benefits, allowing multinational companies to exploit internal debt to transfer profits to jurisdictions with lower tax rates. Although the BEPS Action Plan provides governments with guidelines to curb interest deductions and combat profit shifting linked to financing arrangements, its implementation varies across nations. Moreover, multinational corporations leverage internal debt for tax planning and profit-shifting purposes. This research conducts a Systematic Literature Review on the tax treatment of financial transactions, focusing on debt. Through an examination of papers available on the OECD website, particularly those analyzing thin capitalization rules and transfer pricing practices worldwide, we collected 43 empirical publications from three journal system publishers: ScienceDirect, SpringerLink, and Proquest. The study scrutinizes tax planning tactics adopted by multinational firms, particularly profit shifting, debt manipulation, and transfer pricing, to reduce tax liabilities and boost profits. It investigates the effects of thin capitalization regulations, highlighting discrepancies between countries. Although these practices comply with legal frameworks, tax authorities often perceive them as ethically questionable, prompting countermeasures. Tax regulations profoundly influence the strategic distribution of multinational corporations’ profits. Relaxed enforcement leads to heightened income shifting, particularly within privately owned multinational corporations (MNCs), necessitating legislative adjustments to promote fairer financing practices. Group ratios and anti-avoidance regulations are implemented to mitigate profit shifting, affecting tax revenue, investment dynamics, and economic stability.
Suggested Citation
Nurlita Sukma Alfandia, 2024.
"How do countries curb their debt or profit shifting: a systematic literature review,"
Cogent Business & Management, Taylor & Francis Journals, vol. 11(1), pages 2344032-234, December.
Handle:
RePEc:taf:oabmxx:v:11:y:2024:i:1:p:2344032
DOI: 10.1080/23311975.2024.2344032
Download full text from publisher
As the access to this document is restricted, you may want to search for a different version of it.
Corrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:oabmxx:v:11:y:2024:i:1:p:2344032. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
We have no bibliographic references for this item. You can help adding them by using this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://cogentoa.tandfonline.com/OABM20 .
Please note that corrections may take a couple of weeks to filter through
the various RePEc services.