Conflicting Transfer Pricing Incentives and the Role of Coordination

49 Pages Posted: 17 May 2010 Last revised: 20 Sep 2016

See all articles by Jennifer Blouin

Jennifer Blouin

University of Pennsylvania - Accounting Department

Leslie A. Robinson

Dartmouth College - Accounting; Dartmouth College - Tuck School of Business

Jeri K. Seidman

University of Virginia - McIntire School of Commerce

Date Written: September 1, 2016

Abstract

Our study evaluates the role of coordination, at both the government- and the firm-level, on the transfer prices set by U.S. multinational corporations (MNCs) when income taxes and duties cannot be jointly minimized with a single transfer price. We find that either the presence of a coordinated income tax and customs enforcement regime or coordination between the income tax and customs functions alters transfer prices for these firms. Our analyses have implications for both firms and taxing authorities. Specifically, our findings suggest that MNCs might decrease their aggregate tax burdens by increasing coordination within the firm, or that governments might increase their aggregate revenues by improving coordinating enforcement across taxing authorities. Our study is novel in that we document, in a specific setting, how coordination influences MNCs’ tax reporting behavior.

Keywords: transfer pricing, income shifting, customs duties, coordination

JEL Classification: H25, M40

Suggested Citation

Blouin, Jennifer and Robinson, Leslie and Seidman, Jeri K., Conflicting Transfer Pricing Incentives and the Role of Coordination (September 1, 2016). Tuck School of Business Working Paper No. 2010-74. Available at SSRN: https://ssrn.com/abstract=1609697 or http://dx.doi.org/10.2139/ssrn.1609697

Jennifer Blouin

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-1266 (Phone)

Leslie Robinson (Contact Author)

Dartmouth College - Accounting ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-4018 (Phone)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Jeri K. Seidman

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States

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