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Centralized vs. De-centralized Multinationals and Taxes

  • Nielsen, Søren Bo

    (Department of Economics, Copenhagen Business School)

  • Raimondos-Møller, Pascalis

    (Department of Economics, Copenhagen Business School)

  • Schjelderup, Guttorm

    (Department of Economics, Copenhagen Business School)

The paper examines how country tax differences affect a multinational enterprise's choice to centralize or de-centralize its decision structure. 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 (de-)centralized decisions are more profitable when tax differentials are (small) large.

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File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7652
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Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 10-2005.

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Length: 17 pages
Date of creation: 13 Sep 2005
Date of revision:
Handle: RePEc:hhs:cbsnow:2005_010
Contact details of provider: Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Phone: 38 15 25 75
Fax: 38 15 34 99
Web page: http://www.cbs.dk/departments/econ/
Email:


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  1. Haufler, A. & Schjelderup, G., 1999. "Corporate Tax Systems and Cross Country Profit Shifting," Papers 1/99, Norwegian School of Economics and Business Administration-.
  2. S¯ren Bo Nielsen & Pascalis Raimondos-M¯ller & Guttorm Schjelderup, 2003. "Formula Apportionment and Transfer Pricing under Oligopolistic Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 419-437, 04.
  3. Katz, Michael L., 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," Department of Economics, Working Paper Series qt79b870w0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  4. Caillaud Bernard & Jullien Bruno & Picard Pierre, 1991. "Competing vertical structures : precommitment and renegotiation," CEPREMAP Working Papers (Couverture Orange) 9125, CEPREMAP.
  5. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December.
  6. Kant, Chander, 1988. "Endogenous transfer pricing and the effects of uncertain regulation," Journal of International Economics, Elsevier, vol. 24(1-2), pages 147-157, February.
  7. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
  8. Nielsen, Søren Bo & Raimondos-Møller, Pascalis & Schjelderup, Guttorm, 2010. "Company taxation and tax spillovers: Separate accounting versus formula apportionment," European Economic Review, Elsevier, vol. 54(1), pages 121-132, January.
  9. Laixun Zhao, 2000. "Decentralization and Transfer Pricing Under Oligopoly," Southern Economic Journal, Southern Economic Association, vol. 67(2), pages 414-426, July.
  10. Elitzur, Ramy & Mintz, Jack, 1996. "Transfer pricing rules and corporate tax competition," Journal of Public Economics, Elsevier, vol. 60(3), pages 401-422, June.
  11. Sanna-Randaccio, Francesca & Veugelers, Reinhilde, 2002. "Multinational Knowledge Spillovers with Centralized versus Decentralized R&D: A Game Theoretic Approach," CEPR Discussion Papers 3151, C.E.P.R. Discussion Papers.
  12. Guttorm Schjelderup & Lars Sorgard, 1997. "Transfer Pricing as a Strategic Device for Decentralized Multinationals," International Tax and Public Finance, Springer, vol. 4(3), pages 277-290, July.
  13. Alfons Weichenrieder, 1996. "Fighting international tax avoidance," Fiscal Studies, Institute for Fiscal Studies, vol. 17(1), pages 37-58, February.
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