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International Transfer Pricing for Goods and Intangible Asset Licenses in a Decentralized Multinational Corporation: Review and Extensions

  • Peter C. Dawson


    (Dallas, Texas)

  • Stephen M. Miller


    (Department of Economics, University of Nevada, Las Vegas)

We 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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Paper provided by University of Nevada, Las Vegas , Department of Economics in its series Working Papers with number 0901.

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Length: 57 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:nlv:wpaper:0901
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  1. 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.
  2. Lall, Sanjaya, 1973. "Transfer-Pricing by Multinational Manufacturing Firms," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 35(3), pages 173-95, August.
  3. Harris, D. & Morck, R. & Slemrod, J., 1991. "Income Shifting in U.S. Multinational Corporations," Working Papers 287, Research Seminar in International Economics, University of Michigan.
  4. Spicer, Barry H., 1988. "Towards an organizational theory of the transfer pricing process," Accounting, Organizations and Society, Elsevier, vol. 13(3), pages 303-322, April.
  5. Dworin, Lowell, 1990. "Transfer Pricing Issues," National Tax Journal, National Tax Association, vol. 43(3), pages 285-91, September.
  6. Hines, J.R. & Rice, E.M., 1990. "Fiscal Paradise: Foreign Tax Havens And American Business," Papers 56, Princeton, Woodrow Wilson School - Discussion Paper.
  7. Jack Hirshleifer, 1956. "On the Economics of Transfer Pricing," The Journal of Business, University of Chicago Press, vol. 29, pages 172.
  8. Horst, Thomas, 1971. "The Theory of the Multinational Firm: Optimal Behavior under Different Tariff and Tax Rates," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1059-72, Sept.-Oct.
  9. Jean-Thomas Bernard & Robert J. Weiner, 1989. "Multinational Corporations, Transfer Prices, and Taxes: Evidence from the U.S. Petroleum Industry," NBER Working Papers 3013, National Bureau of Economic Research, Inc.
  10. E. J. R. Booth & Oscar W. Jensen, 1977. "Transfer Prices in the Global Corporation under Internal and External Constraints," Canadian Journal of Economics, Canadian Economics Association, vol. 10(3), pages 434-46, August.
  11. Vaysman, Igor, 1998. "A model of negotiated transfer pricing," Journal of Accounting and Economics, Elsevier, vol. 25(3), pages 349-384, June.
  12. L. W. Copithorne, 1971. "International Corporate Transfer Prices and Government Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 4(3), pages 324-41, August.
  13. Jerome E. Hass, 1968. "Transfer Pricing in a Decentralized Firm," Management Science, INFORMS, vol. 14(6), pages B310-B331, February.
  14. Jenkins, Glenn P & Wright, Brian D, 1975. "Taxation of Income of Multinational Corporations: The Case of the United States Petroleum Industry," The Review of Economics and Statistics, MIT Press, vol. 57(1), pages 1-11, February.
  15. Schjelderup, G. & Sorgard, L., 1995. "The Multinational Firn Transfer Pricing and the Natural Competition," Papers 16/95, Norwegian School of Economics and Business Administration-.
  16. Grubert, Harry & Mutti, John, 1991. "Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 285-93, May.
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