Tax and tariff planning through transfer prices: The role of the head office and business unit

• 成果类型: Article
• 署名作者: Kohlhase, Saskia; Wielhouwer, Jacco L.
• 署名单位: Erasmus University Rotterdam - Excl Erasmus MC; Erasmus University Rotterdam; Vrije Universiteit Amsterdam; Erasmus University Rotterdam - Excl Erasmus MC; Erasmus University Rotterdam
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2022.101568
• 发表日期: 2023
• 关键词: multinational firms; intrafirm trade; incentives; managerial; authority; BEHAVIOR; havens; set

摘要

We study the roles of the head office (HO) and the business units (BUs) of a multinational corporation (MNC) in reducing income tax and tariff payments through internal transfer prices in international trades. Using confidential transfer price data of a large MNC, we analyze how the different elements of internal transfer prices set by the HO and BUs vary differently from external prices with income tax rates, tariff rates, and the tradeoff between the two. Absent severe agency conflicts, we find that the BUs contribute more to tax planning than the HO, despite that explicit incentives to do so are not included in the compensation schemes. The roles of the HO and BUs vary with product market competition, the risk of conflicts with tax and customs authorities, and agency problems within the firm. Moreover, we provide evidence of strategic trade cost allocations among BUs to reduce income taxes. (c) 2022 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).