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

49 Pages Posted: 1 Jan 2016 Last revised: 1 Apr 2018

See all articles by Inga Hardeck

Inga Hardeck

University of Regensburg

Patrick Uwe Wittenstein

University of Hamburg

Date Written: March 22, 2018

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.

Keywords: advance tax ruling, hybrid arrangement, LuxLeaks, tax avoidance, tax haven

JEL Classification: H25, H26, K34

Suggested Citation

Hardeck, Inga and Wittenstein, Patrick Uwe, Assessing the Tax Benefits of Hybrid Arrangements - Evidence from the Luxembourg Leaks (March 22, 2018). National Tax Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2709629 or http://dx.doi.org/10.2139/ssrn.2709629

Inga Hardeck (Contact Author)

University of Regensburg ( email )

Universitätsstr. 31
Regensburg, Bavaria 93053
Germany
+49 941 943 2679 (Phone)

Patrick Uwe Wittenstein

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

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