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on Accounting and Auditing |
| By: | Eggert, Wolfgang; Itaya, Jun-ichi |
| Abstract: | This paper analyzes a model of corporate tax competition with repeated interaction and with the strategic use of profit shifting within multinationals. We show that international tax coordination is more likely to prevail if the degree of asymmetry in terms of productivity differences between countries is smaller, or if concealment costs of profit shifting are larger when the tax authorities adopt grim-trigger strategies. Allowing for renegotiation in the tax harmonization process generally requires more patient tax authorities to support tax harmonization as a subgame perfect equilibrium. We find somewhat paradoxical situations where higher costs of profit shifting make international tax arrangements less sustainable under weakly-renegotiation-proof strategies. |
| Keywords: | corporate taxation, tax coordination, multinational firms, |
| JEL: | H25 H87 F23 |
| Date: | 2009–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:hok:dpaper:214&r=acc |
| By: | Sven P. Jost |
| Abstract: | This paper investigates the transfer pricing risk awareness of multinational firms using cross-sectional data of more than 350 firms located in 24 countries and classified in 12 industries. Moving beyond the sole tax optimization motives of multinational firms, we extend the existing literature by using unique firm-level information such as that the transfer pricing risk awareness is assessed and reported by the person ultimately responsible for transfer pricing. We find that the level of transfer pricing risk awareness of multinational companies predominantly depends on (i) the industry a firm operates in, (ii) a country's risk classification with respect to its transfer pricing regulations (e.g. penalty regimes in case of non-compliance with transfer pricing regulations), (iii) firm size and (iv) the interaction effect of the first two factors. By way of contrast, the time of introduction of transfer pricing regulations and also tax considerations do not seem to play a crucial role for transfer pricing risk perceptions. |
| Keywords: | Transfer pricing; International taxation; Multinational firms; Tax risk management |
| JEL: | F23 H25 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2009-21&r=acc |