Formula apportionment and transfer pricing under oligopolistic competition

Nielsen, S. B., Raimondos-Møller, Pascalis, & Schjelderup, G. (2003) Formula apportionment and transfer pricing under oligopolistic competition. Journal of Public Economic Theory, 5(2), pp. 419-437.

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Abstract

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.

Impact and interest:

28 citations in Scopus
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ID Code: 94020
Item Type: Journal Article
Refereed: Yes
DOI: 10.1111/1467-9779.00140
ISSN: 1097-3923
Copyright Owner: Copyright 2003 Wiley-Blackwell Publishing, Inc.
Deposited On: 23 Mar 2016 01:29
Last Modified: 23 Mar 2016 01:29

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