Transfer Pricing of Taiwan's Listing/OTC Enterprises Between Mainland China and Taiwan: Quantile Regression Analysis

Chung-Jian Huang (), Chau-Jung Kao (), So- De Shyu () and Chao-Hung Yu ()
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Chung-Jian Huang: Department of Finance, National Sun Yat-sen University, 70, Lian-Hai Rd., Kaohsiung 80424, Taiwan
Chau-Jung Kao: Department of Finance, National Sun Yat-sen University, 70, Lian-Hai Rd., Kaohsiung 80424, Taiwan
So- De Shyu: Department of Finance, National Sun Yat-sen University, 70, Lian-Hai Rd., Kaohsiung 80424, Taiwan
Chao-Hung Yu: Department of Finance, National Sun Yat-sen University, 70, Lian-Hai Rd., Kaohsiung 80424, Taiwan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2011, vol. 14, issue 01, 129-151

Abstract: The main purpose of this paper is to explore the issue of enterprise's transfer pricing which has been noticed by tax administrations of many nations in recent years. The academia has also striven to develop models for interpreting transfer pricing and assessing transfer pricing profit of enterprises. A precise model is applied in this study to interpret enterprise's transfer pricing in practice. Furthermore, this model is also used to assess the transfer pricing profit of listing/OTC electronics companies in Taiwan and study the factors affecting transfer pricing profit. The empirical results show that material expense ratio significantly impacts transfer pricing profit. Corporate income tax expenses are positively and significantly correlated with net incomes of corporate transfer pricing transactions.This study also finds that regardless of whether the net income of corporate transfer pricing transactions is high, medium, or low, the proportion of material costs is positively and significantly correlated with the net income of corporate transfer pricing transactions in all scenarios. Higher profit will be affected by exchange rate. This suggests that companies involved in wafer fabrication, IC packaging and testing, and DRAM packaging and testing (subcontractors with relatively low material costs) are less likely to be involved in transfer pricing decisions.

Keywords: Transfer pricing; quantile regression; net income model; F23 (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0219091511002160

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