Debt/asset ratio as evidence of profit-shifting behaviour in the Slovak Republic

    Michal Ištok Affiliation
    ; Mária Kanderová Affiliation


Companies use different methods and techniques to transfer taxable profits to tax havens. The paper aims at analysing the influence of the relocation of the registered office of Slovak companies in tax havens in relation to the leverage ratio and the ratio of debt per sales and to verify the use of debt by Slovak firms in the transfer of profits. In evaluating these indicators, we chose two approaches. We first analysed the change of indicators only for those firms that transferred their seat to lower tax jurisdiction. The analysis is complemented by a different view, when the selected indicators are compared to a group of businesses with a link to tax havens and with no link to tax havens. Our empirical results clearly indicate the tendency that firms in Slovakia benefit from the possibility of transferring profits to lower tax jurisdictions via debt channels. The median values of debt ratio after the transfer of the registered office to tax havens increased by 7.8%. The median value of the tracking indicator is 1.2 times higher for firms with tax haven links than for companies without links to tax havens.

Keyword : debt ratio, ownership link with tax havens, profit-shifting, tax optimization, Slovak companies, Wilcoxon signed rank test, Mann-Whitney test

How to Cite
Ištok, M., & Kanderová, M. (2019). Debt/asset ratio as evidence of profit-shifting behaviour in the Slovak Republic. Technological and Economic Development of Economy, 25(6), 1293-1308.
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Oct 17, 2019
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