The Impact Of International Tax Incentives On Thin Capitalization Behavior Of Enterprise

At present,the world economic pattern has undergone profound changes.The external environment is facing multiple impacts such as bilateral trade frictions and the global COVID-19.Domestically,China is in a new stage of building a new development pattern and promoting highquality development.In this context,enterprise internationalization has become an important driving force to drive a new round of economic growth,and international enterprise tax is an important part of it.Based on this,a series of international tax base erosion behaviors of multinational corporations put forward a severe test for international investment activities and government taxes.As an important means of tax avoidance,thin capitalization has also become the focus of governments and international organizations.The research on the thin capitalization of multinational enterprises under the incentive of international tax can deepen the research on international investment of multinational enterprises from the theoretical level and enrich the interdisciplinary research on international investment theory and tax.From the practical level,it is of great significance for Chinese enterprises to better participate in international activities and release the new vitality of enterprise internationalization,so as to promote high-quality development.Firstly,this dissertation analyzes the impact of international tax incentives on enterprise thin capitalization from a theoretical perspective,constructs a mathematical model of the relationship between tax rate and capital structure of multinational corporations under global tax incentives,and deduces the positive relationship between tax incentives and thin capitalization indicators under the optimal global value of enterprises.Based on theoretical derivation,this dissertation puts forward the following three theoretical hypotheses:(1)the tax incentive of multinational enterprises based on global tax avoidance will lead to changes in the capital structure of subsidiaries and thin capitalization.(2)There is a positive correlation between the tax rate of the country where the subsidiary is located and the index of thin capitalization.(3)The indicators of thin capitalization of subsidiaries located in tax havens and non tax havens are different.Secondly,using BVD’s Osiris micro enterprise database and the enterprise data of Chinese listed companies and their domestic and foreign subsidiaries from 2009 to 2019 as samples,this paper empirically studies the impact of subsidiary tax incentives on thin capitalization.The benchmark regression results based on the fixed effect model show that there is a positive correlation between the subsidiary’s thin capitalization index and its local tax rate index,that is,international tax incentives have a positive role in promoting the enterprise’s thin capitalization index.Then,the hypotheses deduced from the theoretical model are verified one by one.The grouping test results of tax havens and non tax havens show that the subsidiaries of multinational corporations located in non tax havens are more inclined to thin capitalization.In the industry heterogeneity test,the results show that capital technology intensive enterprises are more inclined to thin capitalization and tax avoidance than laborintensive enterprises.In order to eliminate the endogeneity of the model,the propensity score matching method is used to match the samples and test the balance.The results also verify the above conclusions.In the robustness test,in order to verify the effectiveness of the benchmark regression model,the important explanatory variables and the indexes of the explained variables of the model are replaced,and the reliability of the conclusion is confirmed by re test and analysis.Finally,according to the main conclusions of the study,this paper puts forward targeted policy suggestions to deal with the erosion of international tax base and China’s prevention of tax avoidance through thin capitalization.