Centralized vs. De-Centralized Multinationals and Taxes
21 Pages Posted: 26 Nov 2005
Date Written: November 2005
The paper examines how country tax differences affect a multinational enterprise's choice to centralize or de-centralize its decision structure. Within a simple model that emphasizes the multiple conflicting roles of transfer prices in MNEs - here, as a strategic pre-commitment device and a tax manipulation instrument -, we show that de-centralized decisions are more profitable when tax differentials are (small) large.
Keywords: centralized vs. de-centralized decisions, taxes, MNEs
JEL Classification: H25, F23, L23
Suggested Citation: Suggested Citation