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Formula Apportionment and Transfer Pricing under Oligopolistic Competition

S¯ren Bo Nielsen (), Pascalis Raimondos and Guttorm Schjelderup ()
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S¯ren Bo Nielsen: Copenhagen Business School, EPRU, CEPR, and CESifo,

Journal of Public Economic Theory, 2003, vol. 5, issue 2, 419-437

Abstract: This paper demonstrates that under conditions of imperfect (oligopolistic) competition, a transition from separate accounting (SA) to formula apportionment (FA) does not eliminate the problem of profit shifting via transfer pricing. In particular, if affiliates of a multinational firm face oligopolistic competition, it is beneficial for the multinational to manipulate transfer prices for tax-saving as well as strategic reasons under both FA and SA. The analysis shows that a switch from SA rules to FA rules may actually strengthen profit shifting activities by multinationals. Copyright 2003 Blackwell Publishing Inc..

Date: 2003
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Related works:
Working Paper: Formula Apportionment and Transfer Pricing under Oligopolistic Competition (2001) Downloads
Working Paper: FORMULA APPORTIONMENT AND TRANSFER PRICING UNDER OLIGOPOLISTIC COMPETITION (2000) Downloads
Working Paper: Formula Apportionment and Transfer Pricing under Oligopolistic Competition Downloads
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