Abstract

http://ssrn.com/abstract=874568
 
 

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On Transfer Pricing Conceptual Thoughts on the Nature of the Multinational Firm


Markus Brem


GTP GlobalTransferPricing Business Solutions GmbH

Thomas Alexander Tucha


GTP GlobalTransferPricing Business Solutions GmbH

November 2005

IIMA Working Paper No. 2005-11-03

Abstract:     
This paper deploys Transaction Cost Economics (TCE) to elaborate on the shortcomings of mainstream transfer pricing in multinational firms. Departing from the notion that multinationals increasingly (re-)organize their business along multinational value chains irrespective of jurisdictional borders, the paper discusses the nature of the multinational firm and the problem of choosing the right intra-group (transfer) price. The mainstream transfer pricing approach derived from the Arm's Length Principle is deemed inappropriate for globalized MNEs. Referring to the value chain model, the paper suggests that entrepreneurial coordination is the key performance feature to be used for valuing business activity and for allocating - for tax transfer pricing purposes - standard markups and residual profits along the value chain.

Number of Pages in PDF File: 20

Keywords: transfer pricing, value chain, transaction costs, multinational organization, entrepreneurial coordination

JEL Classification: F23, L14, L22, M13

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Date posted: January 11, 2006  

Suggested Citation

Brem, Markus and Tucha, Thomas Alexander, On Transfer Pricing Conceptual Thoughts on the Nature of the Multinational Firm (November 2005). IIMA Working Paper No. 2005-11-03. Available at SSRN: http://ssrn.com/abstract=874568 or http://dx.doi.org/10.2139/ssrn.874568

Contact Information

Markus Brem (Contact Author)
GTP GlobalTransferPricing Business Solutions GmbH ( email )
Wertinger Straße 40
86368 Gersthofen (Augsburg)
Germany
+49 (821) 9089979 - 81 (Phone)
+49 (821) 9089979 - 89 (Fax)
HOME PAGE: http://www.GlobalTransferPricing.com
Thomas Alexander Tucha
GTP GlobalTransferPricing Business Solutions GmbH ( email )
Wertingerstr. 40
Gersthofen, 86368
Germany
HOME PAGE: http://www.GlobalTransferPricing.com
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