Are Multinational Sales to Affiliates in High Tax Countries Overpriced? A Simple Illustration

Ramkishen Rajan

Economia Internazionale / International Economics, 2000, vol. 53, issue 4, 551-557

Abstract: Empirical evidence of transfer pricing suggests that US sales to affiliates based in low taxed countries are underpriced. The argument has been made that, by symmetry, US sales to affiliates in high tax countries are overpriced. We show that this symmetry assumption is far from certain once realistic assumptions of international tax principles and laws are applied and a non zero import tariff by the foreign country is introduced into a simple model of transfer pricing.

Keywords: Multinational enterprises; tariffs; taxation; trade; transfer pricing (search for similar items in EconPapers)
JEL-codes: F23 H25 (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:ris:ecoint:0236

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