Intercompany Loans and Profit Shifting - Evidence from Company-Level Data

34 Pages Posted: 18 Apr 2007

See all articles by Thiess Buettner

Thiess Buettner

Ifo Institute for Economic Research; CESifo (Center for Economic Studies and Ifo Institute); Ludwig-Maximilians University of Munich

Georg Wamser

University of Tuebingen; ETH Zurich

Date Written: March 2007


This paper is concerned with tax-planning strategies of multinational corporations. A theoretical analysis discusses the choice of the capital structure in a setting where intercompany loans can be used to shift profits to low-tax countries. Empirical evidence is provided using micro-level panel data of virtually all German multinationals made available by the Bundesbank. This comprehensive dataset allows us to exploit differences in taxing conditions of almost eighty countries during a period of nine years. The empirical results confirm a robust impact of tax-rate differences within the multinational group on the use of intercompany loans, supporting the profit-shifting hypothesis. However, the implied tax-revenue effects are rather small, suggesting that costs related to adjusting the capital structure for profit-shifting purposes are substantial.

Keywords: corporate taxation, multination corporations, tax planning, intercompany loans, tax haven, FDI, micro-level data

JEL Classification: H25, F23, G32

Suggested Citation

Buettner, Thiess and Wamser, Georg, Intercompany Loans and Profit Shifting - Evidence from Company-Level Data (March 2007). CESifo Working Paper Series No. 1959. Available at SSRN:

Thiess Buettner (Contact Author)

Ifo Institute for Economic Research ( email )

Poschingerstr. 5

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

Poschinger Str. 5
Munich, DE-81679


Ludwig-Maximilians University of Munich

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539

Georg Wamser

University of Tuebingen ( email )

Wilhelmstr. 19
72074 Tuebingen, Baden Wuerttemberg 72074

ETH Zurich ( email )

Weinbergstr. 35
Zurich, 8003

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