Taxes and Decision Rights in Multinationals

Søren Bo Nielsen, Pascalis Raimondos-Møller () and Guttorm Schjelderup ()

Journal of Public Economic Theory, 2008, vol. 10, issue 2, pages 245-258

Abstract: We examine how a multinational's choice to centralize or decentralize its decision structure is affected by country tax differentials. Within a simple model that emphasizes the multiple conflicting roles of transfer prices in multinational enterprises (MNEs)-here, as a strategic precommitment device and a tax manipulation instrument-we show that centralization is more profitable when tax differentials are large. When tax differentials are small, decentralization can be performed in two different ways each providing the highest profits in a particular range of the tax differential. Hence, the paper emphasizes the organizational flexibility that MNEs have in pursuing tax optimization. Copyright 2008 Blackwell Publishing, Inc..

Date: 2008

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Related works:
Working Paper: Taxes and Decision Rights in Multinationals (2006)
Working Paper: Taxes and Decision Rights in Multinationals (2007)
Working Paper: Taxes and Decision Rights in Multinationals (2006)
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