Resource title

Taxes and Decision Rights in Multinationals

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Resource description

October 3, 2006 ; We examine how a multinational’s choice to centralize or de-centralize itsdecision structure is affected by country tax differentials. Within a simple model that emphasizes the multiple conflicting roles of transfer prices in MNEs — here, as a strategic pre-commitment device and a tax manipulation instrument —, we show that decentralization is preferred in case of small tax differentials, whereas centralization can be more profitable, when tax differentials are large. In essence, the organizational flexibility of MNEs is triggered by the scope for tax minimization. Our analysis allows for both commitment and non-commitment to transfer prices, and for alternative modes of competition.Keywords: Centralized vs. de-centralized decisions, taxes, transfer prices, MNEs.JEL-Classification: H25, F23, L23.

Resource author

Pascalis Raimondos-Møller, Guttorm Schjelderup, Søren Bo Nielsen

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Resource publish date

Resource language

eng

Resource content type

application/pdf

Resource resource URL

http://hdl.handle.net/10398/7509

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