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.

No abstract

Motives of Establishing of New Onshore and Off shore Companies by the Slovak Enterprises in 2014We contribute to the rare evidence of driving motives of establishing new onshore and off shore companies by analysing the situation in the Slovak Republic in 2014. We analyse fi nancial and ownership data for the Slovak enterprises already included in onshore and off shore business, providing data by corporate service providers on the driving motives and their combination for the Slovak customers in 2014 and the available external data assessing the quality of the Slovak business environment. We present the empirical evidence that the motive of tax benefi ts is ranked as the most important, followed by the anonymity of the UBO, fl exible arrangement of ownership relations, asset protection, asset management and trusteeship and special cases. In the second part of our research we provide empirical evidence on signifi cant areas of the business environment aff ecting the number of newly established onshore and off shore companies by the Slovak enterprises between 2005 and 2014. The indicators assessing the quality of the Slovak business environment are divided into two groups -paying taxes plus doing business and the quality of the legal system in Slovakia. Our research shows that from the fi rst group is insignifi cant only the indicator of time to comply with taxes. On the other side, the perception of corruption and the functionality of the state institutions are evaluated as signifi cant from the second group. Medzi najčastejšie motívy využívania daňových rajov patria daňové úspory. Kategó-ria daní (medzinárodné daňové plánovanie a medzinárodná daňová optimalizácia) je skúmaná z viacerých uhlov. Podľa niektorých autorov (napr. Graham, Tucker, 2006; Dharmapala, 2008;Minnick, Noga, 2010)

The main aim of this paper is to provide empirical evidence about profit-shifting to selected tax havens by Slovak companies. This contribution focused on the very rare evidence of use of tax havens by Slovak companies not only in the field of corporate income tax, but also in selected areas of profitability. Two sources of data were used. Lists of Slovak companies with tax haven links were provided by the company, Bisnode, and financial statements of investigated companies were gained from the Finstat database. Based on the available data, the investigated period was between 2008 and 2016. We statistically tested selected indicators (ETR, taxes per assets, ROE, ROA, and ROS) of Slovak companies with direct ownership links to tax havens compared to their counterparts. Our findings suggest that Slovak companies with an ownership link to tax havens pay significantly lower taxes compared to companies without ownership links to tax havens during the period monitored. The aggressive tax planning was not only confirmed by the significantly lower reported values of ETR and taxes per assets, but also by the lower values of ROA. On the one side, Slovak companies with ownership links to midshore tax havens had the highest values of ROE, ROA, and ROS, but on the other side, these Slovak companies reported the highest ETR among the appointed categories (onshore, midshore, and offshore). The lowest taxes paid per unit of total assets were found in Slovak companies with ownership links to onshore tax havens. The analysis was supplemented by the changes of the selected indicators before and after obtaining an ownership link to a tax haven.

No abstract

Recently a trend has come about of transferring the registered offices of parent companies or their subsidiaries to jurisdictions often marked as tax havens worldwide. This trend can also be seen in Slovakia. Our main aim is to examine the possible links between criteria such as the NACE sector, the jurisdiction category, the size of share capital invested, ownership interests and the number of years from the start of business (company formation) to the year of transferring the registered office to the tax haven, and to justify the tendencies in behaviour from the subsidiaries point of view. The formulation of assumptions is based on the statements of corporate service providers (CSPs), which directly, partially or fully, help companies set up or restructure their international corporate structures by using tax haven jurisdictions. This survey is based on the available database of Slovak companies obtained from the databases of Bisnode Slovakia, ltd. We analysed the available data on 3,483 Slovak companies between 2005-2015 by using both graphical methods and statistical induction methods (mainly Fisher's exact test of independence) of randomly selected data from the entire database. Our results confirm that there is a statistically significant relationship between the jurisdiction category and three parameters: the NACE sector, ownership interests and the share capital. On the other hand, the relationship between the jurisdiction category and the period of transferring of registered office to tax havens has not been statistically confirmed.

This paper aims to quantify the impact of direct equity ownership links between Slovak companies and tax havens. We distinguish between three types of tax haven: onshore, midshore and offshore. The financial impacts are measured by indicators of profitability (ROA); activity (total asset turnover); liquidity (current ratio); and bankruptcy (IN05). To measure the impacts, we link the Bisnode and Finstat databases. The first database lists those Slovak companies that had links with tax havens during 2005–2015. The second provides financial statements for all Slovak companies. It was found that: 1) There are statistically significant differences in all investigated indicators between Slovak companies with and without links to tax havens. Those with links to tax havens generally reported worse economic situations and levels of performance compared to those without such links. We conclude that having a parent company resident in a tax haven had a negative effect on financial performance. 2) There are statistically significant differences between the selected indicators of company performance, across the different categories of tax haven, and for companies with no links to tax havens. 3) Those with no such links show statistically significant correlations between all their examined performance indicators. But for those companies with links to tax havens, the only statistically significant correlation was between profitability and the remaining indicators. 4) Companies with ownership links to tax havens are clearly engaged in profit-shifting activities. The results suggest opportunities for follow-up projects, especially focusing on different industries and company size that could specify their heterogeneous approaches and variability in objectives.

The key issues for transfer pricing is performing the comparability analysis with aim to find external comparable companies i.e. companies performing same or similar business activities in the same or similar economic and market conditions. However, during the COVID-19 pandemic, which have been affecting business in a totally new way, there are obstacles and uncertainty how to perform comparability analysis and related comparability adjustments reflecting current economic and market conditions. As the COVID-19 pandemic and crisis has had a significant impact on these conditions and unprecedently changed the economic environment. Moreover, due to the time-lag in commercial databases presenting financial data of potential comparable companies operating in the Europe, taxpayers face a new problem: how to defend their arm´s length position for fiscal years 2020 and 2021 while reflecting current economic and market conditions. The aim of the paper is to evaluate approaches how to reflect the COVID-19 pandemic in the comparability analysis and related comparability adjustments. Based on the results, we are rather sceptical about the practical application of recommended approaches: the taxpayers face a great challenge in how to make adequate comparability adjustments and at the same time be able to properly defend them to the tax administrator.