17 Pages Posted: 11 Feb 2013
Date Written: February 5, 2013
This paper examines transfer pricing in general. First, three different approaches to transfer pricing options and their advantages and disadvantages are investigated. Based on the analysis, it is difficult to make recommendations on the best transfer pricing methods. Next, the international aspect of transfer pricing is examined. This paper illustrates that transfer pricing is a major issue in multinational organizations, since transfer pricing plays a major role in corporate taxation strategies. Also, ethical issues in regard to transfer pricing and its effects on personnel is examined in this paper. It is concluded that transfer pricing can create conflicts; however, it is a tool for performance evaluation and can motivate personnel and align corporate and personnel goals when practiced strategically.
Keywords: corporate taxation, decentralization, international business, multinational, responsibility centers, transfer pricing
JEL Classification: D01, F23, H21, H25, H73, H87, K34, L11, L14, L2, M4
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