Work detail

Determinants of the Demand for Tax Haven Operations: Empirical Evidence from the Czech Republic

Author: Mgr. Markéta Burianová
Year: 2016 - summer
Leaders: doc. Petr Janský Ph.D.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 84
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/109855/
Abstract: The aim of this thesis is to explore the firm-specific determinants of the demand for
tax haven operations by Czech firms. Our objective is to better understand the firms’
incentives for tax haven use, and furthermore whether there exists cross-haven
heterogeneity in those incentives. The thesis examines the firms’ tax haven investment
behaviour by analysing firm-level data for 15,530 Czech firms for year 2013. To the
extent of our knowledge, this has been the first research of its kind devoted to Czech
firms. The evidence suggests that larger, more profitable firms with larger international
presence are most likely to use tax havens. The analysis also indicates that higher firm
indebtedness is associated with greater likelihood of establishing tax haven operations.
This would suggest Czech firms engage in profit shifting through the use of debt
financing. Furthermore, service firms were found to be more likely to use tax havens
than manufacturing firms. This contrasts with previous research where R&D intensity
was a leading indicator of tax haven use. Additionally, we found significant
cross-haven heterogeneity in the determinants, particularly in the sector-specific
characteristics. In our sample, service firms favoured Cyprus and the Netherlands,
while manufacturing firms preferred Luxembourg and Switzerland. The findings of the
thesis suggest policy makers turn their focus to service firms engaging in tax haven
use, and to debt financing as the method used for profit shifting. We also propose
concentrating on tax haven countries individually rather than considering them
a homogenous group.

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