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Transfer Pricing, Double Taxation, and the Cost of Capital

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  • Weichenrieder, Alfons J

Abstract

The effects of double taxation are analyzed when a multinational enterprise can shift profits by transfer pricing behavior. It is shown that the well-known Hartman-Sinn neutrality result may not hold in this case. Surprisingly, an increase in the taxation of foreign dividends may lead to a lower cost of capital for the foreign subsidiary. Copyright 1996 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Weichenrieder, Alfons J, 1996. "Transfer Pricing, Double Taxation, and the Cost of Capital," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(3), pages 445-452.
    • Handle: RePEc:bla:scandj:v:98:y:1996:i:3:p:445-52
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    Cited by:

    1. Annick Hespel & Michel Mignolet, 2000. "Tax-aided financial services companies and the cost of capital," Fiscal Studies, Institute for Fiscal Studies, vol. 21(3), pages 349-374, September.
    2. Egger, Peter & Eggert, Wolfgang & Winner, Hannes, 2010. "Saving taxes through foreign plant ownership," Journal of International Economics, Elsevier, vol. 81(1), pages 99-108, May.
    3. Matsui, Kenji, 2011. "Intrafirm trade, arm's-length transfer pricing rule, and coordination failure," European Journal of Operational Research, Elsevier, vol. 212(3), pages 570-582, August.
    4. Seppo Kari & Jouko Ylä-Liedenpohja, 2005. "Effects of an Equalization Tax on Multinational Investments and Transfer Pricing," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(1), pages 45-61, March.
    5. Marcel Gérard, 2002. "Interjurisdictional Company Taxation in Europe, the German Reform and the New EU Suggested Direction," CESifo Working Paper Series 636, CESifo.
    6. Halvorsen, H.E. & Lund, D., 1998. "Rent Taxation when Cost Tranfers are Possible, but Costly," Memorandum 20/1998, Oslo University, Department of Economics.
    7. Clemens Fuest & Bernd Huber & Jack Mintz, 2003. "Capital Mobility and Tax Competition: A Survey," CESifo Working Paper Series 956, CESifo.
    8. Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September.
    9. Kenji Matsui, 2012. "Auditing internal transfer prices in multinationals under monopolistic competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(6), pages 800-818, December.
    10. Alfons Weichenrieder, 1996. "Anti-tax-avoidance provisions and the size of foreign direct investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(1), pages 67-81, January.
    11. Lund, Diderik, 2002. "Rent taxation when cost monitoring is imperfect," Resource and Energy Economics, Elsevier, vol. 24(3), pages 211-228, June.

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