Economics of Transfer Pricing

Edited by Lorraine Eden, Professor of Management and Gina and Anthony Bahr Professor in Business, Texas A&M University, US

• Contents:PART I THE EARLY WORK: DIVISIONALIZED TRANSFER PRICING1. Paul W. Cook, Jr. (1955), ‘Decentralization and the Transfer-Price Problem’, Journal of Business, 28 (2), April, 87–94 2. Jack Hirshleifer (1956), ‘One the Economics of Transfer Pricing’, Journal of Business, 29 (3), July, 172–843. Jack Hirshleifer (1957), ‘Economics of the Divisionalized Firm’, Journal of Business, 30 (2), April, 96–1084. J. R. Gould (1964), ‘Internal Pricing in Firms When There Are Costs of Using an Outside Market’, Journal of Business, 37 (1), January, 61–67PART II GOVERNMENTS AND TRANSFER PRICING A. Government Regulation5. Thomas Horst (1971), ‘The Theory of the Multinational Firm: Optimal Behaviour under Different Tariff and Tax Rates’, Journal of Political Economy, 79 (5), September–October, 1059–726. L. W. Copithorne (1971), ‘International Corporate Transfer Prices and Government Policy’, Canadian Journal of Economics, IV (3), August, 324–417. E. J. R. Booth and Oscar W. Jensen (1977), ‘Transfer Prices in the Global Corporation under Internal and External Constraints’, Canadian Journal of Economics, 10 (3), August, 434–468. Lorraine A. B. Eden (1978), ‘Vertically Integrated Multinationals: A Microeconomic Analysis’, Canadian Journal of Economics, 11 (3), August, 534–469. Takao Itagaki (1979), ‘Theory of the Multinational Firm: An Analysis of Effects of Government Policies’, International Economic Review, 20 (2), June, 437–4810. Eric W. Bond (1980), ‘Optimal Transfer Pricing when Tax Rates Differ’, Southern Economic Journal, 47 (1), July, 191–20011. Homi Katrak (1981), ‘Multi-National Firms’ Exports and Host Country Commercial Policy’, Economic Journal, 91 (362), June, 454–6512. Larry Samuelson (1982), ‘The Multinational Firm with Arm’s Length Transfer Price Limits’, Journal of International Economics, 13 (3–4), November, 365–7413. Lorraine Eden (1983), ‘Transfer Pricing Policies under Tariff Barriers’, Canadian Journal of Economics, 16 (4), November, 669–8514. W. Erwin Diewert (1985), 'Transfer Pricing and Economic Efficiency', in Alan M. Rugman and Lorraine Eden (eds), Multinationals and Transfer Pricing, Chapter 3, London, UK and New York, NY, USA: St. Martin's Press, 47–7915. Lorraine Eden (1985), ‘The Microeconomics of Transfer Pricing’, in Alan M. Rugman and Lorraine Eden (eds.), Multinationals and Transfer Pricing, Chapter 2, London: Croom Helm and New York: St. Martin’s Press, 13–4616. Chander Kant (1988), ‘Endogenous Transfer Pricing and the Effects of Uncertain Regulation’, Journal of International Economics, 24 (1–2), February, 147–57 17. Chander Kant (1990), ‘Multinational Firms and Government Revenues’, Journal of Public Economics, 42, July, 135–4718. Lorraine Eden (1998), ‘Taxing Multinationals in Theory’, in Lorraine Eden (ed.) Taxing Multinationals: Transfer Pricing and Corporate Income Taxation in North America, Toronto: University of Toronto Press, 279–31919. Guttorm Schjelderup and Alfons J. Weichenrieder (1999), ‘Trade, Multinationals, and Transfer Pricing Regulations’, Canadian Journal of Economics, 32 (3), May, 817–3120. Christian Keuschnigg and Michael P. Devereux (2013), ‘The Arm’s Length Principle and Distortions to Multinational Firm Organization’, Journal of International Economics, 89, 432–40B. Bargaining Models21. Jan Svejnar and Stephen C. Smith (1984), ‘The Economics of Joint Ventures in Less Developed Countries’, Quarterly Journal of Economics, 99 (1), February, 149–6822. Thomas J. Prusa (1990), ‘An Incentive Compatible Approach to the Transfer Pricing Problem’, Journal of International Economics, 28 (1–2), February, 155–7223. Thomas A. Gresik and Douglas R. Nelson (1994), ‘Incentive Compatible Regulation of a Foreign-Owned Subsidiary’, Journal of International Economics, 36 (3–4), May, 309–3124. Ramy Elitzur and Jack Mintz (1996), ‘Transfer Pricing Rules and Corporate Tax Competition’, Journal of Public Economics, 60, 401–2225. Andreas Haufler and Guttorm Schjelderup (2000), ‘Corporate Tax Systems and Cross-Country Profit Shifting’, Oxford Economic Papers, 52 (2), April, 306–2526. Pascalis Raimondos-Møller and Kimberley Scharf (2002), ‘Transfer Pricing Rules and Competing Governments’, Oxford Economic Papers, 54 (2), April, 230–4627. Hans Jarle Kind, Karen Helene Midelfart and Guttorm Schjelderup (2005), ‘Corporate Tax Systems, Multinational Enterprises, and Economic Integration’, Journal of International Economics, 65 (2), March, 507–2128. Susana Peralta, Xavier Wauthy and Tanguy van Ypersele (2006), ‘Should Countries Control International Profit Shifting?’, Journal of International Economics, 68 (1), January, 24–37PART III MARKETS AND TRANSFER PRICING A. Market Distortions29. Raveendra N. Batra and Josef Hadar (1979), ‘Theory of the Multinational Firm: Fixed versus Floating Exchange Rates’, Oxford Economic Papers, 31 (2), July, 258–6930. Takao Itagaki (1981), ‘The Theory of the Multinational Firm under Exchange Rate Uncertainty’, Canadian Journal of Economics, 14 (2), May, 276–9731. Guttorm Schjelderup and Lars Sørgard (1997), ‘Transfer Pricing as a Strategic Device for Decentralized Multinationals’, International Tax and Public Finance, 4 (3), July, 277–9032. Laixun Zhao (2000), ‘Decentralization and Transfer Pricing under Oligopoly’, Southern Economic Journal, 67 (2), October, 414–26B. Product Characteristics: Intangibles and Non-Renewable Resources33. George F. Kopits (1976), ‘Intra-Firm Royalties Crossing Frontiers and Transfer-Pricing Behaviour’, Economic Journal, 86 (344), December, 791–80534. Larry Samuelson (1985), ‘Transfer Pricing in Exhaustible Resource Markets', in Alan M. Rugman and Lorraine Eden (eds), Multinationals and Transfer Pricing, Chapter 5, London, UK and New York, NY, USA: St. Martin's Press, 98-11635. Harry Grubert (2003), ’Intangible Income, Intercompany Transactions, Income Shifting, and the Choice of Location’, National Tax Journal, 56, 221–4236. Matthias Dischinger and Nadine Riedel (2011), ‘Corporate Taxes and the Location of Intangible Assets within Multinational Firms’, Journal of Public Economics, 95, (7-8), August, 691–707PART IV EMPIRICAL ESTIMATES OF TRANSFER PRICE MANIPULATION A. Income Shifting Estimates37. Marion B. Stewart (1986), ‘U.S. Tax Policy, Intrafirm Transfers, and the Allocative Efficiency of Transnational Corporations’, Public Finance/Finances Publiques, 41, 350–7138. Harry Grubert and John Mutti (1991), ‘Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making’, Review of Economics and Statistics, 73 (2), May, 285–9339. John Jacob (1996), ‘Taxes and Transfer Pricing: Income Shifting and the Volume of Intrafirm Transfers’, Journal of Accounting Research, 34 (2), Autumn, 301–1240. Eric J. Bartelsman and Roel M. W. J. Beetsma (2003), ‘Why Pay More? Corporate Tax Avoidance Through Transfer Pricing in OECD Countries’, Journal of Public Economics, 87, (9-10), September, 2225–5241. Lorraine Eden, Luis F. Juarez Valdez and Dan Li (2005), ‘Talk Softly but Carry a Big Stick: Transfer Pricing Penalties and the Market Valuation of Japanese Multinationals in the United States’, Journal of International Business Studies, 36, 398–41442. Céline Azémar and Gregory Corocos (2009), ‘“Multinational Firms” Heterogeneity in Tax Responsiveness: The Role of Transfer Pricing’, World Economy, 32, 1291–318PART V TRANSFER MISPRICING ESTIMATES 43. Sanjaya Lall (1973), ‘Transfer-Pricing by Multinational Manufacturing Firms’, Oxford Bulletin of Economics and Statistics, 35 (3), August, 173–9344. Anita M. Benvignati (1985), ‘An Empirical Investigation of International Transfer Pricing by US Manufacturing Firms’, in Alan M. Rugman and Lorraine Eden (eds), Multinationals and Transfer Pricing, Chapter 10, London, UK and New York, NY, USA: St. Martin's Press, 193–21145. Jean-Thomas Bernard and Robert J. Weiner (1990), ‘Multinational Corporations, Transfer Prices, and Taxes: Evidence from the U.S. Petroleum Industry’, in Assaf Razin and Joel Slemrod (eds.) Taxation in the Global Economy, Chicago, USA: University of Chicago Press, 123–54 46. Deborah L. Swenson (2001), ‘Tax Reforms and Evidence of Transfer Pricing’, National Tax Journal, 54 (1), 7–2547. Kimberly A. Clausing (2003), ‘Tax-Motivated Transfer Pricing and US Intrafirm Trade Prices’, Journal of Public Economics, 87, 2207–2348. Lorraine Eden and Peter Rodriguez (2004), ‘How Weak are the Signals? International Price Indices and Multinational Enterprises’, Journal of International Business Studies, 35 (1), 61–7449. Agnes W. Y. Lo, Raymond M. K. Wong and Michael Firth (2010), ‘Can Corporate Governance Deter Management from Manipulating Earnings? Evidence from Related-Party Sales Transactions in China’, Journal of Corporate Finance, 16 (2), April, 225–3550. Michael J. Ferrantino, Xuepeng Liu and Zhi Wang (2012), ‘Evasion Behaviors of Exporters and Importers: Evidence from the U.S.-China Trade Data Discrepancy’, Journal of International Economics, 86 (1), January, 141–57Index