Using data on the operations of U.S. parent firms and their foreign affiliates between 1982 and 1994, this paper examines the extent to which tax minimizing behavior influences intrafirm trade. The results indicate that taxes have a substantial influence on intrafirm trade flows between U.S....

Schlechte Noten für die deutschen Finanzbehörden: Vorabverständigungen über Verrechnungspreise fehlen, Verfahrensdauern sind zu lang und Transparenz ist nicht gegeben. Im internationalen Vergleich befindet sich die Bundesrepublik mit ihrer Praxis rund um Verrechnungspreisverfahren noch immer...

In-kind transfers can provide insurance benefits when prices of consumption goods vary, as is common in developing countries. We develop a model demonstrating that in-kind transfers are welfare improving to beneficiaries relative to cash if the covariance between the marginal utility of income...

On 5th October 2015, the OECD along with G20 finally released a fifteen-point action plan on their project on Base Erosion and Profit Shifting (BEPS). Issues related to transfer pricing formed a major part of this final report, with BEPS Action Plan 8-10 focusing on it exclusively. The actions...

The view that the transfer pricing problem vanishes under universal destination-based cash flow taxation (DBCFT) is based on how firms behave in perfectly competitive markets. We show that the neutralizing effect DBCFT has on transfer price incentives fails once multinational firms are...

For the last several years, Apple has been defending tax strategies utilized in Ireland before the European Union (EU) General Court. The European Commission, using Article 107 of the Treaty on the Functioning of the European Union, argues that Ireland provides state aid to Apple regarding...

IRS's Section on Transfer Pricing with proper comparable set studied as ancillary matter to the US antitrust practice where manufacturing sites and distribution channel entail cross border transactions

The Research Paper commences with an overview of Pillar One and Pillar Two followed by detailed discussions on salient provisions of Pillar Two. Pillar Two is envisaged to have a widespread impact on Small Island Developing States (SIDS) which are a distinct group of 38 United Nations (UN)...

This paper reconsiders the empirical evidence of the relationship between tax treaties and FDI using U.S. outbound FDI to 78 countries over the period of 2007-2018. Unlike previous studies, we explicitly consider differences in the tax environments of recipient economies, including their...

In order to create complex business structures and to obtain economic benefits, multinational companies have given rise to transfer pricing. Due to their importance, it has been possible to expand international trade to a higher level. This study focuses on the issue of transfer pricing and...

In this article we introduce model to describe the behavior of a multinational company (MNC) that operates transfer pricing and debt shifting, with the purpose of incrementing its value, intended as the sum of equity and debt. We compute, in a stochastic environment and under default risk, the...

Zambia has changed its mineral tax regime repeatedly during the past decades in a bid to raise mineral revenue, but with only modest success. This paper looks at what the country needs to do to create a mining fiscal regime that could sustain operations, boost output, and raise revenues without...

This study develops theory and discusses implications of inflexibility in tax-motivated income shifting. We show that inflexibility to adjust income-shifting strategies within a tax year in response to losses implies that income-shifting incentives are based on the expected rather than the...

The abuse of transfer pricing by multinational enterprises (MNEs) is a topical issue the world over. Abusive transfer pricing results in the erosion of tax bases and profit shifting from countries with high tax rates to those with lower tax rates, thus enabling tax avoidance and evasion....

The problem of revenue leakages through transfer pricing remains unabated, and an examination of possible causes is a continuum. This study provides a nuanced examination of the interaction between MNCs and the tax consultants (TCs) which is treated with mixed views in the existing literature....

According to plans put forward by the OECD/G20 Inclusive Framework on BEPS, a share of residual profit earned by eligible MNEs is to be taxed by market jurisdictions. For this purpose, revenue-based formulaic apportionment of residual profit is proposed. This note argues against the use of a...

We study the choice between source-based and destination-based corporate taxes in a two-country model, allowing multinational firms to use transfer pricing to allocate profits across tax jurisdictions. We show that source-based taxation is a Nash equilibrium for tax revenue maximizing...

This study investigates how strategic tax transfer pricing of a multinational company (MNC) and two tax authorities in different countries affects production and tax avoidance decisions at the firm level and tax revenues at the country level. We employ a game-theoretical model to analyze the...

In a previous paper I described how the tax design called the X Tax would facilitate an international tax system free of many of the complexities and avoidance opportunities plaguing the existing international tax regime and also have neutrality properties generally deemed desirable. A choice...

In this article, the author explains how Brazil’s transfer pricing methods, which rely heavily on fixed margins, can be reconciled with the OECD’s transfer pricing guidelines and how emerging economies can benefit from the resulting system

Owner/operators often retain specialized analysts to perform intellectual property valuation, damages, or transfer price analyses. These analyses may be performed for transaction, financing, taxation, planning, accounting, and litigation purposes. Outside of the intellectual property dispute...

COVID-19, as we all know, has been a curse to the mankind. While we all wished for the year 2020 to end soon, to make a fresh start to our handicapped lifestyle, work style, etc., but little did we know that the year 2021 will be even more challenging due to subsequent wave hitting some...

This paper investigates regulation on corporate income taxation with multinationals and transfer pricing. We recommend full cooperation within the EU if profit shifting costs are sufficiently low and cannot be influenced to a large extend. Otherwise, high profit shifting costs or the potential...

For mitigating the problems of transfer pricing formula apportionment (FA) is discussed intensively. However, FA could even be more harmful than transfer pricing because income shifting would require changing economic decisions instead of just taking advantage of accounting options. We analyze...

Conducted in a framework which embodies tax-shifting opportunities, risk of losses and possibility of interjurisdictional loss-offset, this paper investigates a reform of multijurisdictional enterprises taxation, a move from Separate Accounting to Formulary Apportionment. Findings are summarised...

We analyse tax competition with corporate income taxes in a common market where tax revenues are allocated according to an apportionment formula. Generally, tax competition is sharper (i.e., equilibrium tax rates are lower) the more tax-elastic is the apportionment formula. This depends on the...

In a previous paper I described how the tax design called the X Tax would facilitate an international tax system free of many of the complexities and avoidance opportunities plaguing the existing international tax regime and also have neutrality properties generally deemed desirable. A choice...

The European Commission recently endorsed a future company tax policy that would allow companies to consolidate their tax bases and apportion the income across the EU using an allocation mechanism. This policy would replace the separate accounting method with formula apportionment of EU group...

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...

This paper presents evidence of profit shifting in response to differences in corporate tax rates for a large selection of OECD countries. In our estimates we control for the effects of tax rate changes on real activity. Our baseline estimates suggest that, on average, a unilateral increase in...

The Full Federal Court decision in the Glencore Case raises very important questions in relation to core concepts underlying Australia’s previous and current transfer pricing rules. The case involves the pricing structure that an Australian mining company used for the copper concentrate it...

The Global Formulary Apportionment Model (GFA Model) applies to the tax accounting of the Global Taxable Income (GTI) of a Multinational Enterprise (MNE) and the Formulary Apportionment (FA) of this GTI between the member states of the model – here the G 20 nations. The resulting Global...

While there have been few decided cases under the 1995 Transfer Pricing regulations and the OECD Guidelines, it is clear by now that the transfer pricing problem is as bad as it ever was. That is why my co-authors Kimberly Clausing and Michael Durst and I have recently re-proposed adopting...

This paper considers the treatment of multinational business in the system known as an X Tax. The focus is on the choice between origin and destination treatments of transborder transactions. The destination-principle approach sidesteps the transferpricing problem. It remains in the...

Intellectual property owner/operators often retain forensic accountants, financial advisors, industry consultants, licensing specialists, economists, and other professionals (collectively referred to herein as “analysts”) to perform valuation, damages, or transfer price analyses related to...

The transfer pricing law has been brought in to prevent the cases of cross-border profit shifting that might occur amongst enterprises who are related parties. Due to huge Multinational Enterprises (MNEs) now being able to function and conduct business activities across different countries at...

This article highlights key points discussed during the fifth Global Transfer Pricing Conference, “Transfer Pricing Developments around the World 2020”, organized by the Transfer Pricing Center at WU Vienna University of Economics and Business, Institute for Austrian and International Tax...