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Under a Creative Commons license Open access AbstractThe paper analyzes multinational enterprises' incentives to manipulate internal transfer prices to take advantage of tax differences across countries, and implications of transfer-pricing regulations as a countermeasure against such profit shifting. We find that tax-motivated foreign direct investment (FDI) may entail inefficient internal production but may benefit consumers. Thus, encouraging transfer-pricing behavior to some extent can enhance social welfare. Furthermore, we consider tax competition between two countries to explore its interplay with transfer-pricing regulations. We show that the FDI source country will be willing to set a higher tax rate and tolerate some profit shifting to a tax haven country if the regulation is tight enough. We also indicate a novel mechanism through which it is the larger country that undertakes tax-motivated FDI, the pattern we often observe in reality. KeywordsMultinational enterprise Corporate tax Transfer pricing Foreign direct investment Arm's length principle Tax competition JEL classificationF12 F23 H21 H26 L12 L51 Cited by (0)© 2020 The Author(s). Published by Elsevier B.V. Read Online (Free) relies on page scans, which are not currently available to screen readers. To access this article, please contact JSTOR User Support . We'll provide a PDF copy for your screen reader. With a personal account, you can read up to 100 articles each month for free. Already have an account? Log in Monthly Plan
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journal article On the Economics of Transfer PricingThe Journal of Business Vol. 29, No. 3 (Jul., 1956) , pp. 172-184 (13 pages) Published By: The University of Chicago Press https://www.jstor.org/stable/2350664 Read and download Log in through your school or library Alternate access options For independent researchers Read Online Read 100 articles/month free Subscribe to JPASS Unlimited reading + 10 downloads Purchase article $14.00 - Download now and later Journal Information The Journal of Business ceased publication with the November 2006 issue (Volume 79, Number 6). Founded in 1928, The Journal of Business was the first scholarly journal to focus on business-related research and played a pioneering role in fostering serious academic research about business. However, in appreciation of the increasing specialization in business scholarship, as reflected in the emergence of many specialized business journals, the faculty of the University of Chicago's Graduate School of Business decided after careful deliberation and extensive dialogue to cease publication of the more broadly focused Journal at the end of 2006, after nearly eight decades of publication by the University of Chicago Press. Publisher Information Since its origins in 1890 as one of the three main divisions of the University of Chicago, The University of Chicago Press has embraced as its mission the obligation to disseminate scholarship of the highest standard and to publish serious works that promote education, foster public understanding, and enrich cultural life. Today, the Journals Division publishes more than 70 journals and hardcover serials, in a wide range of academic disciplines, including the social sciences, the humanities, education, the biological and medical sciences, and the physical sciences. Rights & Usage This item is part of a JSTOR Collection. Which method of transfer pricing considered when the supplier division is a monopoly producer?Opportunity Cost Transfer Pricing
This may also be the case where the supplier division is a monopoly producer or the user division is a monopoly consumer.
What are the methods of transfer pricing?Here are five widely used transfer pricing methods your business should consider.. Comparable Uncontrolled Price. ... . Cost-Plus. ... . Resale-Minus. ... . Transactional Net Margin (TNMM) ... . Profit Split.. What are the three types of transfer pricing?Generally, companies can determine transfer prices three different ways: market-based transfer prices, cost- based transfer prices, and negotiated transfer prices.
Which pricing method is useful when the selling division is operating below capacity?Variable cost-based pricing approach is useful when the selling division is operating below capacity. The manager of the selling division will generally not like this transfer price because it yields no profit to that division. In this pricing system, only variable production costs are transferred.
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Which method of transfer pricing considered when the supply division is a monopoly producer?
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