Optimal Negotiated Transfer Pricing and Its Implications for International Transfer Pricing of Intangibles
Intangibles exhibit zero marginal licensing cost, including cross-border intra-firm licensing of intangibles within a MNC. A MNC may not realize the full profit potential of licensing intangibles intra-firm, however, under suboptimal negotiated transfer pricing schemes. Our negotiated transfer pricing bargaining structure unlocks this potential by producing an optimal transfer price and larger optimal intra-firm licensed quantity. Increased licensing of intangibles intra-firm across borders produces a greater potential tax savings/consolidated after-tax profit gain per unit of transfer price adjustment, creating a context where MNCs feel a greater imperative or incentive to move beyond legal tax avoidance toward evasion.
|Date of creation:||Jan 2009|
|Date of revision:||Dec 2010|
|Publication status:||Published in International Journal of Intellectual Property Management, 4(4) 2011|
|Note:||Published in revised form as: Dawson, P.C. and Miller, S.M. (2011) ‘Optimal negotiated transfer pricing and its implications for international transfer pricing of intangibles’, Int. J. Intellectual Property Management, Vol. 4, No. 4, pp.239–269|
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