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Tax Competition And Transfer Pricing Disputes

15 Pages Posted: 14 Dec 1999  

Kashif S. Mansori

Colby College; CESifo (Center for Economic Studies and Ifo Institute)

Alfons J. Weichenrieder

Goethe University Frankfurt - Department of Applied Econometrics and International Economic Policy; Vienna University of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: October 1999

Abstract

Transfer pricing regulations, which are designed to limit multinationals' profit shifting activities, have been tightened in recent years in the US. These new regulations have been enacted to increase the tax revenue collected from multinationals, in response to domestic political concerns that foreign companies are not contributing adequate tax revenues. This paper examines the implications of such a struggle by governments to collect tax revenues from multinational firms. It is shown that such behavior will lead to a non-cooperative equilibrium characterized by the double taxation of corporate profits, and consequently by a depressed level of international trade. Conversely, cooperation between governments could potentially increase both tax revenues and trade.

JEL Classification: F12, H87

Suggested Citation

Mansori, Kashif S. and Weichenrieder, Alfons J., Tax Competition And Transfer Pricing Disputes (October 1999). Available at SSRN: https://ssrn.com/abstract=199672 or http://dx.doi.org/10.2139/ssrn.199672

Kashif Mansori

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Colby College ( email )

Department of Economics 5230 Mayflower Hill
Waterville, ME 04901-8852
United States
207-872-3563 (Phone)
207-872-3263 (Fax)

Alfons J. Weichenrieder (Contact Author)

Goethe University Frankfurt - Department of Applied Econometrics and International Economic Policy ( email )

United States

HOME PAGE: http://www.uni-frankfurt.de/fb02/weichenrieder/

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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