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Author: Michael P. Donohoe Publisher: ISBN: Category : Languages : en Pages : 45
Book Description
Financial derivatives play an increasingly common role in corporate tax avoidance. This paper takes a descriptive approach to answer the fundamental, yet under explored, questions of why derivatives are useful for corporate tax avoidance and how they fulfill this objective. To evaluate why, I develop and discuss a simple framework of research, practical issues, and anecdotes about derivatives-based tax avoidance. I then provide unique insight into how derivatives reduce taxes by discussing the complex transaction-level detail of two derivatives-based tax planning strategies. Finally, I identify potential issues that might be addressed in future research. Overall, by discussing the concepts and mechanics of derivatives-based tax avoidance, this study serves as a prologue to extant and future research on the topic.
Author: Michael P. Donohoe Publisher: ISBN: Category : Languages : en Pages : 45
Book Description
Financial derivatives play an increasingly common role in corporate tax avoidance. This paper takes a descriptive approach to answer the fundamental, yet under explored, questions of why derivatives are useful for corporate tax avoidance and how they fulfill this objective. To evaluate why, I develop and discuss a simple framework of research, practical issues, and anecdotes about derivatives-based tax avoidance. I then provide unique insight into how derivatives reduce taxes by discussing the complex transaction-level detail of two derivatives-based tax planning strategies. Finally, I identify potential issues that might be addressed in future research. Overall, by discussing the concepts and mechanics of derivatives-based tax avoidance, this study serves as a prologue to extant and future research on the topic.
Author: Michael Patrick Donohoe Publisher: ISBN: Category : Languages : en Pages :
Book Description
In doing so, it connects academic literature on an increasingly important tax and accounting issue to that of practitioners and regulators. Additionally, the study provides evidence on why, how, and the extent to which derivatives are used to facilitate corporate tax avoidance.
Author: Michael P. Donohoe Publisher: ISBN: Category : Languages : en Pages :
Book Description
This study estimates the corporate tax savings from financial derivatives. I document a 3.6 and 4.4 percentage point reduction in three-year current and cash effective tax rates (ETRs), respectively, after a firm initiates a derivatives program. The decline in cash ETR equates to $10.69 million in tax savings for the average firm and $4.0 billion for the entire sample of 375 new derivatives users. Of these amounts, $8.75 million and $3.3 billion, respectively, are incremental to tax savings that theory suggests are a byproduct of risk management. Collectively, these findings provide economic insight into the prevalence of derivatives-based tax avoidance.
Author: Oktavia Weidmann Publisher: Kluwer Law International B.V. ISBN: 9041159835 Category : Law Languages : en Pages : 439
Book Description
The exploding use of derivatives in the last two decades has created a major challenge for tax authorities, who had to develop appropriate derivatives taxation rules that strike a balance between allowing capital markets to function effectively by removing artificial tax barriers and at the same time protecting their countries' tax base from tax avoidance schemes that utilise these instruments. Derivatives exist in a vast variety and complexity and new forms or combinations of existing forms appear ad hoc as new risk categories emerge and companies seek to invest in or hedge these risks. This very thorough book discusses and analyses taxation issues posed by derivatives used in domestic as well as in cross-border transactions. In great detail the author presents approaches that can be adopted by tax legislators to solve these problems, clarifying her solutions with specific reference to components of the two most important domestic tax systems in relation to derivatives in Europe, those of the United Kingdom and Germany. Examples of derivatives transactions and arbitrage schemes greatly elucidate the nature of derivatives and how they can be effectively taxed. The following aspects of the subject and more are covered: – basic economic concepts in the context of derivatives such as replication, put-call-parity, hedging and leverage; - designing a suitable definition of derivatives in domestic tax law; - achieving coherence in domestic tax rules by applying a 'special regime approach' versus an 'integrative approach' and the distinction of income and capital, equity and debt; - alignment of accounting standards and taxation rules and the application of fair value accounting for tax purposes; - how to tax hedged positions and post-tax hedging schemes; - taxation of structured financial products and hybrid instruments with focus on bifurcation and integration approaches and the recent BEPS discussion drafts on hybrid mismatch arrangements; - refining the 'beneficial ownership' – concept in domestic law and in tax treaties and an analysis of recent case law; - withholding taxes in the context of domestic and cross-border dividend tax arbitrage schemes; and - tackling derivatives tax arbitrage effectively in anti-avoidance legislation. By providing an in-depth analysis of corporate taxation issues that arise in domestic as well as in cross-border derivatives transactions, this book is not only timely but of lasting value in the day-to-day work of tax lawyers and tax professionals in companies, banks and funds, and is sure to be of interest to government officials, academics and researchers involved with financial instruments taxation.
Author: Antti Laukkanen Publisher: IBFD ISBN: 9087220227 Category : Bonds Languages : en Pages : 487
Book Description
This dissertation aims to provide a comprehensive overview of the taxation of investment derivatives and the relationship between the derivatives and the accrual and realization methods. Investment derivatives, such as convertible bonds, include an initial investment and a derivative (an option) to buy or sell or to participate in the value movements of some underlying property. The principal focus of this study is on three universal tax issues, namely valuation, timing and the taxation of unrealized gains. As a common principle, interest income and capital gains are treated more similarly in corporate taxation than in individual taxation. Moreover, the taxation of financial instruments is currently in a turn-around phase in several countries, not least because of the implementation of the IFRS rules in accounting and the related fair value principle. The obligation to use fair values in accounting apparently motivates tax legislators to strive to use the same principles in taxation as well. The comparative method plays a major role in this study by examining the tax legislations and the tax practices of different countries. An in-depth analysis of the similarities and differences of tax laws and practices in the United States, the United Kingdom, Germany, Finland and Sweden is provided. This is of particular interest as the underlying components, single and often specified financial derivatives, are basically identical. While this study does not deal with individual tax treaties or bilateral transactions, the OECD Model is scrutinized in order to highlight the underlying principles of the given recommendations, especially with respect to interest income and capital gains. Due to the increasing importance of IFRS rules in accounting, the study is not limited to tax law, but also looks at issues from the perspective of finance, accounting and economics.
Author: Yoojin Lee Publisher: ISBN: 9780355307047 Category : Languages : en Pages : 75
Book Description
This paper introduces new evidence on the extent to which non-financial firms use financial derivatives to avoid taxes. In particular, I use the fair value of derivatives segregated by hedging and non-hedging designation to identify derivative activities that are used to benignly and/or aggressively avoid taxes. I use new derivative disclosures required by SFAS 161 to collect detailed information about firms' use of derivatives. I find a negative association between cash effective tax rates and the fair value of hedging derivative assets. This finding implies that firms defer recognition of gains on hedging derivatives to lower cash taxes. Furthermore, I find an association between cash effective tax rates and both non-hedging derivative assets and liabilities. This finding is consistent with firms aggressively avoiding cash taxes using non-hedging derivatives by selectively choosing when to recognize gains and losses. In addition, I find no association between GAAP effective tax rates and derivatives, implying that firms in my sample do not use derivatives to manage earnings through the tax expense.
Author: Oktavia Weidmann Publisher: Kluwer Law International B.V. ISBN: 9403523840 Category : Law Languages : en Pages : 676
Book Description
Derivatives stand at the forefront of financial innovation, continually evolving to accommodate new asset classes and risk categories. In the past decade, the growing popularity of cryptoassets and ESG investments has sparked the development of a variety of innovative investment strategies and risk management tools, including crypto and ESG derivatives and related structured products. This new edition has similarly evolved. Using illustrative examples, it provides a comprehensive analysis of the key tax issues associated with derivatives and cryptoassets in domestic and cross-border transactions and presents approaches that tax legislators could adopt to solve them. The new edition also comments on recent trends in global tax policy, such as the OECD Base Erosion and Profit Shifting (BEPS) 1.0 and 2.0 projects. Throughout the book, specific references are made to UK, German, and Swiss tax law. The updated edition addresses the following topics: economic and financial properties of derivatives and cryptoassets; definition of derivatives for tax purposes and its application to crypto derivatives and ESG derivatives, among others; accounting treatment of derivatives and cryptoassets under IFRS, UK, German and US GAAP; current tax legislation and policy alternatives to the taxation of derivatives and cryptoassets; characterisation of derivatives gains and losses as income or capital, and equity or debt; accounting and taxation treatment of hedging transactions involving derivatives or cryptoassets; accounting and taxation rules applying to structured products and hybrid instruments, including crypto and ESG-linked structured products; withholding taxes on derivatives and the concept of beneficial ownership in domestic and cross-border transactions; and anti-avoidance legislation applying to derivatives and cryptoassets, including the domestic law implementation of BEPS Action 2, the EU Anti-Tax Avoidance Directives (ATAD I and II), the tax transparency rules for cryptoassets (DAC8) and Pillar Two. This comprehensive book analyses recent developments in three intertwined areas of expertise: financial products, accounting and tax law. It will be a valuable resource to tax professionals in their daily practice of advising companies, banks and investment funds. It will also be of interest to government officials and researchers engaged in the taxation of derivatives, cryptoassets, and ESG investment products.
Author: Julian Ghosh Publisher: ISBN: 9781405747165 Category : Languages : en Pages : 800
Book Description
Offering invaluable tax planning help for the tax specialist, Taxation of Corporate Debt and Derivatives is a highly practical publication, ideal for the busy tax practitioner and lawyer. Debt and Treasury management occupies an increasing proportion of the work of tax practitioners. With considerable legislation to get to grips with, this publication, updated twice per annum, offers a concise and comprehensive version of the law in this area. This publication examines, in detail, each of the regimes involving: * Foreign exchange transactions * Financial instruments (such as options, debt contracts, currency swaps) * Corporate debt, i.e. the loan relationship provisions * Anti-avoidance provisions including thin capitalisation, funding bonds etc
Author: Jinbo Luo Publisher: ISBN: Category : Languages : en Pages : 50
Book Description
This paper examines the effect of short selling on corporate tax avoidance. We propose a financial constraint view, that short selling triggers corporate insiders' incentive to avoid taxes for funding investment opportunities in emerging markets. Employing staggered short-sale deregulation on the Chinese stock market as quasi-exogenous shocks, we find that the deregulation of short-sales reduces firms' cash effective tax rates and effective tax rates by 11.8% and 21.1%, respectively. This effect is especially prominent for financially constrained firms and non-state-owned firms. We further show that short-sale deregulation indeed increases the cost of equity capital of Chinese listed firms. These results suggest that tax avoidance helps to generate additional funds and mitigates financial constraints under downward price pressure in emerging markets that have strong government intervention and lax law enforcement.
Author: Michael P. Donohoe
Author: Michael P. Donohoe
Author: Michael Patrick Donohoe
Author: Michael P. Donohoe
Author: Oktavia Weidmann
Author: Antti Laukkanen
Author: Yoojin Lee
Author: Oktavia Weidmann
Author: Julian Ghosh
Author: United States. Congressional Budget Office
Author: Jinbo Luo