The Resource The capital structure of large firms and the use of Dutch financing entities

The capital structure of large firms and the use of Dutch financing entities

Label
The capital structure of large firms and the use of Dutch financing entities
Title
The capital structure of large firms and the use of Dutch financing entities
Creator
Subject
Language
eng
Summary
Large firms may issue debt securities to obtain external financing or set up lowly-taxed affiliates for internal debt-shifting purposes. In addition, they may channel interest payments through Dutch special purpose entities (SPEs) to avoid withholding taxes, a widely-used arbitrage strategy. This paper analyses the capital structure of large EU-based multinationals, providing evidence that the use of Dutch-issuing SPEs is associated with higher debt financing relative to equity. Furthermore, it shows that EU subsidiaries of larger firms are more leveraged and that the use of Dutch on-lending SPEs is also associated with higher subsidiary leverage. The paper provides evidence that Dutch SPEs facilitate higher external debt financing as well as internal debt shifting. The findings indicate that withholding taxes on interest payments to entities outside the EU, determined by individual EU member states, are not very effective. The national tax systems of EU countries such as the Netherlands, which does not impose interest withholding tax, allow large firms to avoid those taxes
Citation source
In: Fiscal studies. - London. - Vol. 35 (2014),
http://library.link/vocab/creatorName
Weyzig, F
Geographic coverage
European Union
Language note
English
http://library.link/vocab/subjectName
  • MNE
  • subsidiary company
  • financing
  • intra-group financing
  • debt
  • tax arbitrage
  • interest
  • withholding tax
  • tax avoidance
Label
The capital structure of large firms and the use of Dutch financing entities
Instantiates
Publication
Label
The capital structure of large firms and the use of Dutch financing entities
Publication

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