Assessing the Tax Benefits of Hybrid Arrangements - Evidence from the Luxembourg Leaks
49 Pages Posted: 1 Jan 2016 Last revised: 1 Apr 2018
Date Written: March 22, 2018
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: Suggested Citation