When do firms use one set of books in an international tax compliance game?

• 成果类型: Article
• 署名作者: Reineke, Rebecca; Weiskirchner-Merten, Katrin; Wielenberg, Stefan
• 署名单位: Leibniz University Hannover; Vienna University of Economics & Business
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-021-09667-9
• 发表日期: 2023
• 页码: 1856-1885
• 关键词: Incentives; strategies; audits; TRADE

摘要

This study examines how a strategic tax auditor affects a multinational firm's transfer pricing in a tax compliance game. Our model uses a divisionalized firm, in both a low-tax and a high-tax country, that decides to implement a transfer-pricing regime with either one or two sets of books. After observing its unit costs, the firm reports a compliant or noncompliant tax transfer price. In a regime with one set of books, the single transfer price coordinates the quantity decision and determines the tax payments. In a regime with two sets, different transfer prices serve those tasks. In contrast to previous studies, our analysis incorporates a strategic tax auditor, who observes the tax transfer price and decides whether to audit the firm. Real-world regulations suggest larger penalties for detected noncompliance under a two-sets-of-books transfer-pricing regime. Our analysis identifies the mixed strategy equilibria and examines how variations in the tax regulation-the tax rate difference and the penalty difference-affect the firm's tax aggressiveness. We show that a firm acts less tax aggressively with a higher tax rate difference. Additionally, the model predicts that the firm either increases or decreases the probability of keeping one set of books for a smaller penalty difference.