Multinational Corporations, Transfer Prices, and Taxes: Evidence from the U.S. Petroleum Industry

Jean-Thomas Bernard () and Robert J. Weiner

No 3013, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Economic research on transfer-pricing behavior by multinational corporadons has emphasized theoretical modeling and institutional description. This paper presents the fiit systematic empirical analysis of transfer prices, using data from the petroleum industry. On the basis of oil imported into the United States over the period 1973 - 1984, we test two propositions: i) Are prices set by integrated companies for their internal transfers different from those prevailing in arm 's-length (i.e., inter-company) trade, when other variables, such as oil quality, are controlled for? ii) Do average effective corporate income tar rates explain observed patterns of transfer pricing? Regression analysis leads to the following conclusions: i) Transfer and arm's-length prices differ significantly for oil origznating in some countries but not all. When multiplied by the relevant import volumes, these differences are relatively smalL The revenue transferred through deviations from arm's-length prices represents two percent or less of the value of the crude oil imported by multinational companies each year. ii) The observed differences between arm's-length and transfer prices are not easily explained by average effective tax rates in exporting countries. Our results provide little support for the claim that multinational petroleum companies set their transfer prices to evade taxes. We offer several hypotheses to explain our findings.

Date: 1989-06
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Published as Taxation in the Global Economy, ed. by Assaf Razin and Joel Slemrod, University of Chicago Press, 1990.
Published as Bernard, Jean-Thomas and Robert J. Weiner. "Transfer Prices And The Excess Cost Of Canadian Oil Imports: New Evidence On Bertrand Versus Rugman," Canadian Joural of Economics, 1992, v25(1), 22-40.
Published as Tax Effects on Foreign Direct Investment in the United States: Evidence from a Cross-Country Comparison , Joel B. Slemrod. in Taxation in the Global Economy , Razin and Slemrod. 1990

Downloads: (external link)
http://www.nber.org/papers/w3013.pdf (application/pdf)

Related works:
Chapter: Multinational Corporations, Transfer Prices, and Taxes: Evidence from the US Petroleum Industry (1990)
Working Paper: MULTINATIONAL CORPORATIONS, TRANSFER PRICES, AND TAXES: EVIDENCE FROM THE U.S. PETROLEUM INDUSTRY (1988)
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:nbr:nberwo:3013

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3013

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().