Optimal Negotiated Transfer Pricing in Theory and Practice: Tangible and Intangible Intra-Firm Transfers
AbstractWe review and extend the core literature on international transfer price manipulation to avoid or evade taxes. Under negotiated transfer pricing with a viable bargaining structure, including performance evaluation disconnected from the transfer price, divisions voluntarily exchange accurate information to obtain firm-wide optimality, a result not dependent on restraint from exercising internal market power. For intangible licenses, a larger optimal profit shift for a given tax rate change strengthens incentives for transfer pricing abuse. In practice, an intangible's arm's length range is viewed as a guideline, a context where incentives for abuse materialize. Transfer pricing for intangibles obliges greater tax authority scrutiny.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2009-06.
Length: 58 pages
Date of creation: Jan 2009
Date of revision: Dec 2010
Publication status: Published in International Journal of Intellectual Property Management, 4(4) 2011
Note: This paper previously circulated with the title "International Transfer Pricing for Goods and Intangible Asset Licenses in a Decentralized Multinational Corporation: Review and Extensions"
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Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
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Web page: http://www.econ.uconn.edu/
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Negotiated transfer pricing; licensing intangibles; decentralized MNC;
Find related papers by JEL classification:
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property Rights
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