The Economics of Advance Pricing Agreements

Johannes Becker, Ronald Davies and Gitte Jakobs

No 201419, Working Papers from School of Economics, University College Dublin

Abstract: Advance pricing agreements (APAs) determine transfer prices for intra-firm transactions in advance. This paper interprets these contracts as a means to overcome a hold-up problem that occurs because governments cannot commit to non-excessive future tax rates. In addition, with private information, just as in practice, our APAs will be complex and require lengthy negotiations. Never- theless, implemented APAs lead to a Pareto improvement even when all agents are risk neutral. However, not all efficient APAs are concluded in equilibrium. International agreements to avoid double taxation will likely reduce the number of realized APAs.

Keywords: Advance pricing agreements; Corporate taxation; Multinational firms; Transfer pricing (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-cta
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Citations: View citations in EconPapers (1)

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http://hdl.handle.net/10197/6151 First version, 2014 (application/pdf)

Related works:
Journal Article: The economics of advance pricing agreements (2017)
Working Paper: The economics of advance pricing agreements (2014)
Working Paper: The Economics of Advance Pricing Agreements (2014)
Working Paper: The Economics of Advance Pricing Agreements (2014)
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