As Uncertain as Taxes

Research output: Contribution to conferencePaperResearchpeer-review


Does room for interpretation in the tax law affect corporate financial decisions? To be widely applicable, tax law has to leave room for interpretation, which creates what is known as ’legal uncertainty’. Companies can use this ’legal uncertainty’ for tax planning, or use debt as a relatively certain tax planning tool. I construct a measure of ’legal uncertainty’ and show that this ’legal uncertainty’ leads to a substitution between debt-based and other tax planning strategies. I find that both financing and profit shifting are affected. The strength and direction of this effect depends on the intensity of the enforcement by the tax authority.
Original languageEnglish
Publication date2019
Number of pages64
Publication statusPublished - 2019
Event112th Annual Conference on Taxation. NTA 2019 - Tampa Marriott Water Street , Tampa, United States
Duration: 21 Nov 201923 Nov 2019
Conference number: 112


Conference112th Annual Conference on Taxation. NTA 2019
LocationTampa Marriott Water Street
Country/TerritoryUnited States
Internet address


  • Corporate taxation
  • Capital structure
  • Legal uncertainty

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