Tax Planning through Advanced Tax Rulings – An Exploratory Analysis Using the Luxembourg Tax Leaks

44 Pages Posted: 19 Jun 2019 Last revised: 21 Jun 2019

See all articles by Oliver Zhen Li

Oliver Zhen Li

National University of Singapore (NUS)

Frank Murphy

University of Connecticut - Department of Accounting

Stephen J. Lusch

Texas Christian University - Department of Accounting

Date Written: June 1, 2019

Abstract

We make use of details of advanced tax rulings (ATRs) provided by the Luxembourg Tax Inspector to multinational firms and examine how the types and attributes of ATRs affect tax planning outcomes. We find that ATR firms realize lower GAAP ETRs than control firms. Tax savings achieved by ATR firms are associated with hybrid arrangements, the avoidance of non-income taxes, and the overall complexity of the rulings. While on average, ATRs do not appear to be associated with uncertain tax benefits, the use of more hybrid arrangements and/or exceedingly complex ATRs is associated with higher uncertainty. This suggests that while ATRs provide a degree of certainty in Luxembourg, they may lead to higher uncertainty in other taxing jurisdictions. We contribute to the literature on tax planning of multinationals by providing a unique look into the details of transactions that facilitate tax avoidance. Our paper can provide tax authorities with insight into transactions used by multinationals to move income within organizations.

Keywords: advanced tax rulings; tax planning; Luxemburg leaks

Suggested Citation

Li, Oliver Zhen and Murphy, Frank and Lusch, Stephen J., Tax Planning through Advanced Tax Rulings – An Exploratory Analysis Using the Luxembourg Tax Leaks (June 1, 2019). University of Connecticut School of Business Research Paper . Available at SSRN: https://ssrn.com/abstract=3406285 or http://dx.doi.org/10.2139/ssrn.3406285

Oliver Zhen Li

National University of Singapore (NUS)

Bukit Timah Road 469 G
Singapore, 117591
Singapore

Frank Murphy (Contact Author)

University of Connecticut - Department of Accounting ( email )

School of Business
Storrs, CT 06269-2041
United States

Stephen J. Lusch

Texas Christian University - Department of Accounting ( email )

M.J. Neeley School of Business
TCU Box 298530
Fort Worth, TX 76129
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
32
Abstract Views
229
PlumX Metrics