Taxes and decision rights in multinationals

Bo Nielsen, S., Raimondos-Møller, Pascalis, & Schjelderup, G. (2008) Taxes and decision rights in multinationals. Journal of Public Economic Theory, 10(2), pp. 245-258.

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We examine how a multinational's choice to centralize or decentralize its decision structure is affected by country tax differentials. Within a simple model that emphasizes the multiple conflicting roles of transfer prices in multinational enterprises (MNEs)—here, as a strategic precommitment device and a tax manipulation instrument—we show that centralization is more profitable when tax differentials are large. When tax differentials are small, decentralization can be performed in two different ways each providing the highest profits in a particular range of the tax differential. Hence, the paper emphasizes the organizational flexibility that MNEs have in pursuing tax optimization.

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9 citations in Scopus
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ID Code: 94040
Item Type: Journal Article
Refereed: Yes
DOI: 10.1111/j.1467-9779.2008.00360.x
ISSN: 10973923
Copyright Owner: Copyright 2008 Blackwell Publishing
Deposited On: 22 Mar 2016 02:44
Last Modified: 23 Mar 2016 04:35

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