Taxes and Decision Rights in Multinationals
AbstractWe examine how a multinational's choice to centralize or de-centralize its decision structure is affected by country tax differentials. Within a simple model that emphasizes the multiple conflicting roles of transfer prices in MNEs - here, as a strategic pre-commitment device and a tax manipulation instrument - we show that decentralization is preferred in case of small tax differentials, whereas centralization can be more profitable, when tax differentials are large. In essence, the organizational flexibility of MNEs is triggered by the scope for tax minimization. Our analysis allows for both commitment and non-commitment to transfer prices, and for alternative modes of competition.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5952.
Date of creation: Nov 2006
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- Nielsen, Søren Bo & Raimondos-Møller, Pascalis & Schjelderup, Guttorm, 2007. "Taxes and Decision Rights in Multinationals," Discussion Papers 2007/11, Department of Business and Management Science, Norwegian School of Economics.
- Nielsen, Søren Bo & Raimondos-Møller, Pascalis & Schjelderup, Guttorm, 2006. "Taxes and Decision Rights in Multinationals," Working Papers 07-2006, Copenhagen Business School, Department of Economics.
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
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