Egidijus Kundelis Doctoral Dissertation  “ASSESSMENT OF THE IMPACT OF CORPORATE TAX AVOIDANCE ON FINANCIAL LEVERAGE IN SMALL OPEN ECONOMIES”.

The public defense of the doctoral dissertation will be held at 10 a.m. on the 11 th of February 2022, at ISM University of Management and Economics, room 310. Address: Arklių str. 18, Vilnius, Lithuania.

Supervisor:

Prof. dr. Valdonė Darškuvienė (ISM University of Management and Economics, Social Sciences, Economics, S 004)

About Doctoral Dissertation:

Multinational enterprises (MNEs) use differences in tax systems of various countries and employ debt or profit shifting strategies to successfully reduce their effective tax rate and as a result to increase shareholder earnings. The dissertation aims to investigate corporate tax avoidance phenomenon and its links with financial leverage, to develop a model for assessment of corporate tax avoidance impact on financial leverage in small open economies, taking into account anti-tax avoidance regulation, and test it empirically. The conceptual model incorporates BEPS channels and anti-tax avoidance regulation into a framework to examine corporate tax avoidance phenomenon, channels and effects on firm leverage and performance. Empirical study was performed on the sample of Lithuanian, Latvian, Estonian, Slovakian companies split into domestic and MNEs firms’ sub-samples for the period of 2010–2019, employing fixed effects multiple regression. The research revealed that if a small open economy has comparatively low tax rate, then subsidiaries of MNEs do not have a tax advantage over domestic firms, i.e. they are not involved in corporate tax avoidance via debt shifting. This is one of the factors reducing leverage in small open economies. However, if tax rate becomes higher, this may motivate debt shifting. If small open economies set lenient thin cap (earnings stripping) rules, these are not expected to be effective in business practice. The above-mentioned empirical findings negate anti-tax avoidance measures targeting debt shifting introduced by the OECD and EC and adopted by EU countries. Those measures might cause substantial compliance costs as well as distortions to the firms’ business decisions.

Defense board members

Chairperson:

Prof. dr. Tadas Šarapovas (ISM University of Management and Economics, Social Sciences, Economics – S 004)

Members:

Prof. Dr. Vilija Aleknevičienė (Vytautas Magnus University, Social Sciences, Economics – S 004);
Prof. Dr. Ričardas Krikštolaitis (Vytautas Magnus University, Natural Sciences, Mathematics– N 001);
Prof. Dr. Bogdan Stacescu (BI Norwegian Business School, Economics – S 004);
Prof. Dr. Asta Vasiliauskaitė (Mykolas Romeris University, Social Sciences, Economics – S 004).

Annotation

The dissertation is available at the Martynas Mažvydas National library and library of ISM University of Management and Economics.