EconPapers    
Economics at your fingertips  
 

Production location of multinational firms under transfer pricing: the impact of the arm's length principle

Hayato Kato and Hirofumi Okoshi

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: When multinational enterprises (MNEs) separate the geographical location of affiliates, they can shift profits between the affiliates by manipulating intra-firm prices of inputs. We show that if the international tax difference between the parent and the host countries is large, MNEs choose to separately locate their affiliates in the two countries. We also investigate the impact of the arm's length principle (ALP) on the location choice, which requires that the intra-firm price of inputs should be set equal to the price of similar inputs for the independent downstream firms. The ALP may change the location choice of MNEs, bringing smaller tax revenues to the host country, but greater revenues globally.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Published in International Tax and Public Finance 4 26(2019): pp. 835-871

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Production location of multinational firms under transfer pricing: the impact of the arm’s length principle (2019) Downloads
Working Paper: Production Location of Multinational Firms under Transfer Pricing: The Impact of the Arm's Length Principle (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:78284

Access Statistics for this paper

More papers in Munich Reprints in Economics from University of Munich, Department of Economics Ludwigstr. 28, 80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg ().

 
Page updated 2022-06-23
Handle: RePEc:lmu:muenar:78284