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Evaluating the Effects of ACE Systems on Multinational Debt Financing and Investment

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dc.contributor.author Hebous, Shafik
dc.contributor.author Ruf, Martin
dc.date.accessioned 2018-01-12T00:49:01Z
dc.date.accessioned 2022-07-11T21:37:43Z
dc.date.available 2018-01-12T00:49:01Z
dc.date.available 2022-07-11T21:37:43Z
dc.date.copyright 2017
dc.date.issued 2018
dc.identifier.uri https://ir.wgtn.ac.nz/handle/123456789/20305
dc.description.abstract Theory recommends aligning the tax treatment of debt and equity. A few countries, notably Belgium, have introduced an allowance for corporate equity (ACE) to achieve tax neutrality. We study the effects of adopting an ACE on debt financing, passive investment, and active investment of multinational firms, using high-quality administrative data on virtually all German-based multinationals. We use two main identification strategies, based on (1) synthetic control methods and (2) variations across affiliates within the multinational group. Our results suggest that an ACE reduces the corporate debt ratio of multinational affiliates. Additionally, an ACE increases intra-group lending and other forms of passive investment but has no effects on production investment of multinational affiliates. The findings indicate that a unilateral implementation of an ACE system generates a tax planning opportunity using a structure combining the benefits from the ACE with interest deductions. en_NZ
dc.format pdf en_NZ
dc.language.iso en_NZ
dc.publisher Te Herenga Waka—Victoria University of Wellington en_NZ
dc.relation.ispartofseries Working Papers in Public Finance ; 06/2017 en_NZ
dc.subject ACE en_NZ
dc.subject Financial structure en_NZ
dc.subject Corporate taxation en_NZ
dc.subject Debt bias en_NZ
dc.subject Multinational firms en_NZ
dc.title Evaluating the Effects of ACE Systems on Multinational Debt Financing and Investment en_NZ
dc.type Text en_NZ
vuwschema.contributor.unit School of Accounting and Commercial Law en_NZ
vuwschema.subject.anzsrcfor 140210 International Economics and International Finance en_NZ
vuwschema.type.vuw Working or Occasional Paper en_NZ
vuwschema.subject.anzsrcforV2 350207 International finance en_NZ
vuwschema.subject.anzsrcforV2 380110 International economics en_NZ
dc.rights.rightsholder www.victoria.ac.nz/sacl/about/cpf en_NZ

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