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International Transfer Pricing for Goods and Intangible Asset Licenses in a Decentralized Multinational Corporation: Review and Extensions

Peter Dawson () and Stephen Miller ()
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Peter Dawson: Dallas, Texas

No 901, Working Papers from University of Nevada, Las Vegas , Department of Economics

Abstract: We review and extend the core literature on international transfer price manipulation to avoid or evade taxes. Under negotiated transfer pricing with a viable bargaining structure, including performance evaluation disconnected from the transfer price, divisions voluntarily exchange accurate information to obtain firm-wide optimality, a result not dependent on restraint from exercising internal market power. For intangible licenses, a larger optimal profit shift for a given tax rate change strengthens incentives for transfer pricing abuse. In practice, an intangible’s arm’s length range is viewed as a guideline, a context where incentives for abuse materialize. Transfer pricing for intangibles obliges greater tax authority scrutiny.

Keywords: Negotiated transfer pricing; licensing intangibles; decentralized MNC. (search for similar items in EconPapers)
JEL-codes: F23 H25 H26 L29 O34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc
Date: 2009-01
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