Multinationals and Income Shifting by Debt

Dirk Schindler*, Guttorm Schjelderup

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

6 Citations (Scopus)


Existing literature studies debt shifting and transfer pricing separately. In practice, however, the choice of debt-to-asset ratios in affiliates and the interest rate on internal debt are interrelated management decisions that are also mutually affected by government regulation. Therefore, this paper models these strategies as simultaneous decisions made by the management. We find that the tax sensitivity of the corporate tax base depends on whether debt shifting and transfer pricing are cost complements or substitutes. A second result is that stricter regulation of debt shifting and transfer pricing may have the effect of fostering such activities.

Original languageEnglish
Pages (from-to)263-286
Number of pages24
JournalInternational Journal of the Economics of Business
Issue number3
Publication statusPublished - 1 Sept 2016
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2016 International Journal of the Economics of Business.


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