Formula Apportionment and Transfer Pricing under Oligopolistic Competition
AbstractThis paper demonstrates that under conditions of imperfect (oligopolistic) competition, a transition from separate accounting (SA) to formula apportionment (FA) does not eliminate the problem of profit shifting via transfer pricing. In particular, if affiliates of a multinational firm face oligopolistic competition, it is beneficial for the multinational to manipulate transfer prices for tax-saving as well as strategic reasons under both FA and SA. The analysis shows that a switch from SA rules to FA rules may actually strengthen profit shifting activities by multinationals. Copyright 2003 Blackwell Publishing Inc..
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Bibliographic InfoArticle provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.
Volume (Year): 5 (2003)
Issue (Month): 2 (04)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1097-3923
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- Nielsen, Søren Bo & Raimondos-Møller, Pascalis & Schjederup, Guttorm, 2000. "Formula Apportionment And Transfer Pricing Under Oligopolistic Competition," Working Papers, Copenhagen Business School, Department of Economics 18-2000, Copenhagen Business School, Department of Economics.
- Søren Bo Nielsen & Pascalis Raimondos-Møller & Guttorm Schjelderup, . "Formula Apportionment and Transfer Pricing under Oligopolistic Competition," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 01-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Søren Bo Nielsen & Pascalis Raimondos-Møller & Guttorm Schjelderup, 2001. "Formula Apportionment and Transfer Pricing under Oligopolistic Competition," CESifo Working Paper Series 491, CESifo Group Munich.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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