Taxation and Valuation of International Real Investments

29 Pages Posted: 24 Aug 2003

See all articles by Seppo Juhani Kari

Seppo Juhani Kari

Government of the Republic of Finland - VATT Institute for Economic Research

Jouko Ylä-Liedenpohja

Tampere University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: August 2003

Abstract

The study analyses the incentives for multinationals caused by linking different national tax systems. The dividend tax capitalization hypothesis is extended to include taxes during the repatriation and onward distribution (as equalization tax) to derive the relevant cost of capital formulae for each source of finance. No clear tax advantage of using debt from the parent to the foreign subsidiary is found. Tax conditions are derived for finance companies in third countries used by multinationals to park and rotate profits such as realization gains from trade sales of their subsidiaries. The same tools are applied to analyse corporate inversions.

Keywords: multinational taxation, equalization tax, profit valuation

JEL Classification: H25, H32, H87

Suggested Citation

Kari, Seppo Juhani and Ylä-Liedenpohja, Jouko, Taxation and Valuation of International Real Investments (August 2003). Available at SSRN: https://ssrn.com/abstract=436620

Seppo Juhani Kari (Contact Author)

Government of the Republic of Finland - VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

Jouko Ylä-Liedenpohja

Tampere University - Department of Economics ( email )

P.O. Box 607
Tampere, FIN-33101
Finland

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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