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Transfer Pricing: Roles and Regimes

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  • Søren Bo Nielsen

Abstract

Against a background of rather mixed evidence about transfer pricing practices in multinational enterprises (MNEs) and varying attitudes on the part of tax authorities, this paper explores how multiple aims in transfer pricing can be pursued across four different transfer pricing regimes. A MNE has a production subsidiary in one country, from where it sells the produced good locally as well as to a sales subsidiary in a second country. The latter subsidiary is engaged in duopolistic competition with a local competitor. The MNE has two aims in setting the transfer price: strategic delegation and tax minimization. We examine the extent to which the four transfer pricing regimes we set up allow the MNE to pursue these aims. While neither strategic delegation nor tax minimization will be eliminated, trade-offs are inevitable, albeit to varying degree.

Suggested Citation

  • Søren Bo Nielsen, 2014. "Transfer Pricing: Roles and Regimes," CESifo Working Paper Series 4694, CESifo.
    • Handle: RePEc:ces:ceswps:_4694
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    Cited by:

    1. Wolfram F. Richter & Markus Breuer, 2015. "Pricing the Transfer of Intellectual Property as a Problem of Second-Best Tax Policy," CESifo Working Paper Series 5340, CESifo.
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    3. Richter, Wolfram F. & Breuer, Markus, 2016. "Pricing the Transfer of Intellectual Property: A Plea for Regulated and Internationally Coordinated Profit Splitting," VfS Annual Conference 2016 (Augsburg): Demographic Change 145621, Verein für Socialpolitik / German Economic Association.
    4. Jie Ma & Pascalis Raimondos, 2015. "Competition for FDI and Profit Shifting," CESifo Working Paper Series 5153, CESifo.

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    More about this item

    Keywords

    transfer prices; strategic delegation; tax manipulation; MNEs;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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