Centralized vs. De-Centralized Multinationals and Taxes

Nielsen, Soren Bo; Raimondos, Pascalis; Schjelderup, Guttorm

doi:10.2139/ssrn.854910

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Centralized vs. De-Centralized Multinationals and Taxes

CESifo Working Paper Series No. 1586

21 Pages Posted: 26 Nov 2005

See all articles by Soren Bo Nielsen

Soren Bo Nielsen

Copenhagen Business School - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Queensland University of Technology - School of Economics and Finance; Copenhagen Business School - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Guttorm Schjelderup

NHH Norwegian School of Economics - Department of Business and Management Science

Date Written: November 2005

Abstract

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

Nielsen, Soren Bo and Raimondos, Pascalis and Schjelderup, Guttorm, Centralized vs. De-Centralized Multinationals and Taxes (November 2005). CESifo Working Paper Series No. 1586, Available at SSRN: https://ssrn.com/abstract=854910 or http://dx.doi.org/10.2139/ssrn.854910