International Transfer Pricing for Goods and Intangible Asset Licenses in a Decentralized Multinational Corporation: Review and Extensions
Peter C. Dawson
Stephen M. Miller
University of Nevada, Las Vegas - Department of Economics; University of Connecticut - Department of Economics
January 22, 2009
International Journal of Intellectual Property Management, 4(4) 2011
We review and extend the core literature on international transfer price manipulation to avoid or evade taxes. Under negotiated transfer pricing with a viable bargaining structure, including performance evaluation disconnected from the transfer price, divisions voluntarily exchange accurate information to obtain firm-wide optimality, a result not dependent on restraint from exercising internal market power. For intangible licenses, a larger optimal profit shift for a given tax rate change strengthens incentives for transfer pricing abuse. In practice, an intangible's arm's length range is viewed as a guideline, a context where incentives for abuse materialize. Transfer pricing for intangibles obliges greater tax authority scrutiny.
Number of Pages in PDF File: 57
Keywords: Negotiated transfer pricing, licensing intangibles, decentralized MNC
JEL Classification: F23, H25, H26, L29, O34Accepted Paper Series
Date posted: January 23, 2009 ; Last revised: February 4, 2013
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