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Dissertation/Thesis Abstract

Essays in Transfer Pricing
by Maruster, Sorin, Ph.D., Northwestern University, 2013, 149; 3563779
Abstract (Summary)

The process of globalization is characterized by the growing fragmentation of production and the organization of firms' activities on a global scale. As firms operate across several tax and law jurisdictions they face increasing challenges in complying with local tax and legal regulations without compromising the global strategic goals that drove the firms to expand internationally in the first place. The present study addresses a few important transfer pricing related issues that multinational firms have to deal with.

In Chapter 1 we present several results related multinationals' choice of an optimal strategy in negotiating Advanced Pricing Agreement with several tax authorities. Given the increased complexity of international transactions income earned by multinational firms became subject to double taxation as multiple tax authorities assert the right to tax the income. A quite common instance in which double taxation arises is that related to the use of different transfer pricing methods to allocate income between countries. The APA mechanisms allow a taxpayer to manage transfer pricing uncertainties and audit risks proactively.

In Chapter 2 we address the conflicting objectives that a multidivisional firm usually face: allocation of resource to coordinate managerial efforts or reveal private information and, simultaneously, minimization of the tax burden. We show that in the presence of asymmetric information under certain conditions the use of transfer prices can reconcile the two objectives mentioned above.

Finally in Chapter 3 we develop a model with heterogeneous firms to explain the organizational choice as a result of the interaction of transfer pricing rules, differences in taxes and heterogeneity in productivity across firms.

Indexing (document details)
Advisor: Pavan, Alessandro
Commitee: Al-Najjar, Nabil, Ekmekci, Mehmet
School: Northwestern University
Department: Economics
School Location: United States -- Illinois
Source: DAI-A 74/09(E), Dissertation Abstracts International
Subjects: Economics
Keywords: Advanced pricing agreement, Asymmetric information, Multinational firms, Resource allocation, Transfer pricing
Publication Number: 3563779
ISBN: 978-1-303-12279-8
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