Formula apportionment and transfer pricing under oligopolistic competition
Working paper
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http://hdl.handle.net/11250/162930Utgivelsesdato
2001-05Metadata
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Sammendrag
This paper demonstrates that under conditions of imperfect (oligopolistic)
competition, a transition from separate accounting (SA) to formula apportionment
(FA) does not eliminate the problem of profit shifting via transfer
pricing. In particular, if affiliates of a multinational firm face oligopolistic competition,
it is beneficial for the multinational to manipulate transfer prices for
tax-saving as well as strategic reasons under both FA and SA. The analysis
shows that a switch from SA rules to FA rules may actually strengthen profit shifting activities by multinationals.
Utgiver
Norwegian School of Economics and Business Administration. Department of EconomicsSerie
Discussion paper2001:10