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Three essays on transfer pricing, base erosion and profit shifting of US multinational companies

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Three essays on transfer pricing, base erosion and profit shifting of US multinational companies
Name (type = personal)
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Shukurov
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Firuz
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1977-
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Firuz Shukurov
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author
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Carlos
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Carlos Seiglie
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chair
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Spatareanu
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Mariana
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Mariana Spatareanu
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Poniachek
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Harvey
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Harvey Poniachek
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Gonzalez Corzo
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Mario
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Mario Gonzalez Corzo
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Advisory Committee
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outside member
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Rutgers University
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degree grantor
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Graduate School - Newark
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school
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theses
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2020
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2020-01
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2020
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English
Abstract (type = abstract)
The dissertation focuses on issues of tax avoidance, base erosion and profit shifting of multinational companies and consists of three essays.

First essay studies multinational’s decision making process regarding tax optimization in the global environment with the choice of placing mobile assets in different tax locations and in the presence of possible enforcement from tax authorities. The decision making process is presented as a decision tree, which is used as a tool to evaluate possible payoffs of multinational in regulated environment. Another novelty of the presented approach is inclusion of intermediate destinations (offshores) into existing two ends scheme – home and foreign subsidiary. The model introduces tax authorities in parent and final destinations, which attempt enforce the firm to apply arm-length rules by means of audit and penalties. The results demonstrate that transfer pricing regulations in high tax countries may compel the firm to move the optimal transfer price close to arm-length, especially if efforts of high tax countries are coordinated.

Second Essay attempts to study tax motivated profit shifting of US companies by constructing structural equation model based on factors that traditionally believed to be associated with income shifting and to investigate the nature of the relationships. Additional advantage of this technique lays in possibility to evaluate the relationships among factors in the presence of multi-co-linearity. Since all variables used in the model are observable, measurement model issues associated with latent indicators are not a concern. Data is constructed by merging Compustat North America Fundamentals and Compustat Execucomp covering the period of 2000-2016. Initial results illustrates that publicly available information can be used to measure income shifting effects. Particularly, application of the simultaneous equations’ method in the current analysis confirms that US companies face (i) higher domestic tax obligations and lower abroad tax obligations (ii) book-to-tax difference can be a good sign of tax aggressiveness, (iii) US companies prefers debt financing to equity financing to reduce domestic taxes rather than overseas taxes, and (iv) intangibles are shifted to jurisdictions with low tax rates to reduce taxes in US.

Third essay discusses Luxembourg tax agreements (LTAs, Agreements initiated by the Government of Luxemburg to boost investments), which became a financial scandal first time leaked to newspapers in November 2014 by the group of journalist from the International Consortium of Investigative Journalists. EU authorities (State Aid) have concerns that those companies involved in LTAs were able to reduce their taxes and these agreements signed by multinationals only for tax avoidance purposes and therefore those taxes to be paid in EU. At the same time multinationals claim that LTA were used by them to pursue other management goals such as expansion of the presence in the EU market and for investment decisions. Current paper evaluates whether US multinational companies from S&P 500, which had been involved in Luxemburg Tax Agreements of 2005-2008, were able to reduce their worldwide tax obligations. By comparing results from various difference-in-difference regressions – traditional, quantile and semiparametric, I have found that these companies may have saved more on taxes then other US companies of the S&P list, what indirectly confirms the arguments of EU authorities about tax aggressiveness of those companies involved in Luxembourg agreements.
Subject (authority = LCSH)
Topic
Tax evasion
Subject (authority = RUETD)
Topic
Management
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Rutgers University Electronic Theses and Dissertations
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ETD_10492
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application/pdf
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1 online resource (vii, 93 pages) : illustrations
Note (type = degree)
Ph.D.
Note (type = bibliography)
Includes bibliographical references
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Graduate School - Newark Electronic Theses and Dissertations
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rucore10002600001
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Identifier (type = doi)
doi:10.7282/t3-py1r-f430
Genre (authority = ExL-Esploro)
ETD doctoral
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The author owns the copyright to this work.
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Name
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Shukurov
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Firuz
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2020-01-02 13:13:56
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Firuz Shukurov
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Rutgers University. Graduate School - Newark
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I hereby grant to the Rutgers University Libraries and to my school the non-exclusive right to archive, reproduce and distribute my thesis or dissertation, in whole or in part, and/or my abstract, in whole or in part, in and from an electronic format, subject to the release date subsequently stipulated in this submittal form and approved by my school. I represent and stipulate that the thesis or dissertation and its abstract are my original work, that they do not infringe or violate any rights of others, and that I make these grants as the sole owner of the rights to my thesis or dissertation and its abstract. I represent that I have obtained written permissions, when necessary, from the owner(s) of each third party copyrighted matter to be included in my thesis or dissertation and will supply copies of such upon request by my school. I acknowledge that RU ETD and my school will not distribute my thesis or dissertation or its abstract if, in their reasonable judgment, they believe all such rights have not been secured. I acknowledge that I retain ownership rights to the copyright of my work. I also retain the right to use all or part of this thesis or dissertation in future works, such as articles or books.
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