Arbeitspapier

Taxes and Decision Rights in Multinationals

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.

Language
Englisch

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

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

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

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Nielsen, Søren Bo
  • Raimondos-Møller, Pascalis
  • Schjelderup, Guttorm
  • Copenhagen Business School (CBS), Department of Economics

Time of origin

  • 2006

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