Taxes and Decision Rights in Multinationals

Arbeitspapier

We examine how a multinational’s choice to centralize or de-centralize its decision 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working paper ; No. 7-2006

Classification and Topics

• Classification: Wirtschaft ; Multinational Firms; International Business ; Business Taxes and Subsidies including sales and value-added (VAT) ; Organization of Production
• Subject: centralized vs. de-centralized decisions ; taxes ; transfer prices ; MNEs

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Nielsen, Søren Bo ; Raimondos-Møller, Pascalis ; Schjelderup, Guttorm
• Event: Veröffentlichung
• (who): Copenhagen Business School (CBS), Department of Economics
• (where): Frederiksberg
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/208524
• Last update: 10.03.2025, 11:43 AM CET