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...

We study the optimal combination of corporate tax rate and tax base in a model of a small open economy with heterogeneous firms. We show that it is optimal for the small country's government to effectively subsidize capital inputs by granting a tax allowance in excess of the true costs of...

Since its conception, some within the European Union have expressed concerns over the ability of multinationals to avoid taxation by undertaking transfer pricing to shift profits towards low tax locations. These concerns have been growing, leading to a renewed call for a common consolidated...