Did Tax Reform (Thin Capitalization Rule) from 2005 in Slovenia Achieve its Aim?

  • Tatjana Jovanović University of Ljubljana, Faculty of Administration, Gosarjeva ulica 5, Ljubljana
Keywords: Thin Capitalization, Anti-avoidance Rule, Tax Revenue, Financial Structure, Debt Financing


The thin capitalisation rule is the specific anti-avoidance rule which aims to protect national tax revenues from excessive debt financing of corporations. The literature indicates the effectiveness of thin capitalisation rules in limiting internal borrowing. Following in the footsteps of many countries, Slovenia introduced 'thin cap' rules via a tax reform in 2005. The paper focuses on testing whether the introduction of the rule in 2005 has affected the level of internal borrowing in enterprises which are 25% or more owned by foreign entities from the EU and, consequently, whether it has achieved its aim.