Taxes and Business Strategy

FIE441 Taxes and Business Strategy

  • Topics

    Topics

    The course analyzes strategies of international income shifting to reduce corporate tax payments in multinational companies and combines theoretical insights with empirical evidence. It has two main parts. Part 1 focuses on transfer pricing of intra-firm trade as a tax-avoidance channel (chapters 2 and 3). Part 2 examines international debt shifting as tool to save taxes (chapters 4 to 7).

    In a first block of Part 2, the tax-efficient capital structure in (multinational) firms is derived and discussed (chapters 4 and 5). In a second block, limitations to financial policy such as regulation of tax deductible debt (chapter 6) and the interaction with minority shareholders (chapter 7) are examined.

    The structure of the course is as follows:

    • Introduction, Stylized Facts and Starting Point.
    • Transfer Pricing in the Integrated Firm.
    • International Profit Shifting.
    • Capital Structure and Taxation in a Domestic Firm.
    • Tax-efficient Capital Structures in Multinationals.
    • Debt Shifting and Legal Limitations.
    • Debt Shifting and Minority Ownership

  • Learning outcome

    Learning outcome

    Knowledge

    Upon successful completion of the course the student

    • Has an advanced understanding of the theory behind how taxes affect firm behavior, how firms set up a tax-efficient financing structure, and how tax planning affects investment.
    • Is informed about empirical evidence on both multinationals¿ tax avoidance and its regulation.
    • Knows the main regulatory framework and institutional setting to limit international tax avoidance (arm¿s length principle, thin capitalization rules, controlled-foreign-company rules).

    Skills

    Upon successful completion of the course the student

    • Has acquired an analytical tool set that allows for formally structuring and solving tax-avoidance problems.
    • Can outline set-ups for independent empirical studies on profit shifting.
    • Is able to independently analyze and evaluate the implications of future changes in regulation and the institutional setting.
    • Can apply her/his knowledge on international tax avoidance and firms¿ behavior in an abstract, but still meaningful way.

    General competence

    Upon successful completion of the course the student

    • Has advanced expertise on international income shifting by transfer prices and debt.
    • Can evaluate pro and cons of profit shifting and its regulation.Hcan communicate with specialists in both academia and practice about complex issues in income shifting.

  • Teaching

    Teaching

    Teaching will consist out of lectures, cases and working group sessions, as well as guest lecturers that will cover institutional details.

  • Recommended prerequisites

    Recommended prerequisites

    The course is at the advanced level in the master program. The course may be studied independently, but some prior knowledge in microeconomics is recommended. The literature is mainly based on research articles. Some knowledge in basic corporate finance or public economics is helpful. Alternatively, a good stepping stone is BUS458 International Business Taxation.

  • Requirements for course approval

    Requirements for course approval

    There may be a requirement to successfully complete two short mandatory homeworks in time (approved/non approved). Whether there is such a requirement will be decided in coordination with the students at the beginning of the course.

  • Assessment

    Assessment

    Written school exam (3 hours).

    The exam language is English and all answers need to be given in English.

  • Grading Scale

    Grading Scale

    A-F

  • Semester

    Semester

    Spring

  • Literature

    Literature

    Collection of articles and readings, mainly provided on It¿s Learning.

    • Berk, J., and P. DeMarzo, 2011. Corporate Finance. 2nd Edition, Pearson Prentice Hall, Boston, Chapters 14-16.
    • Miller, M., 1977. Debt and Taxes. Journal of Finance 32, 261-275.
    • Møen, J., D. Schindler, G. Schjelderup, and J. Tropina, 2011. International Debt Shifting: Do Multinationals Shift Internal or External Debt? CESifo Working Paper Series No. 3519, Munich.
    • Myles, G., 1995. Public Economics. Cambridge UK, Chapter 8.
    • Ruf, M., and D. Schindler, 2015. Debt Shifting and Thin-Capitalization Rules ¿ German Experience and Alternative Approaches. Nordic Tax Journal 2015, 17-33.
    • Schindler, D., and G. Schjelderup, 2012. Debt Shifting and Ownership Structure. European Economic Review 56, 635-647.
    • Schjelderup, G., 2017. Multinationals and Transfer pricing. Manuscript.

Overview

ECTS Credits
7.5
Teaching language
English
Semester
Spring

Course responsible

Dirk Schindler, Department of Accounting, Auditing and Law

Guttorm Schjelderup, Deparatment of Business and Management Science