Centralized vs. de-centralized multinationals and taxes

Research, Preprint English OPEN
Nielsen, Søren Bo ; Raimondos-Møller, Pascalis ; Schjelderup, Guttorm (2005)
  • Publisher: Norwegian School of Economics and Business Administration. Department of Economics
  • Subject: Centralized vs. de-centralized decisions; taxes; MNEs | F23 | Transferpreis | taxes | H25 | centralized vs. de-centralized decisions, taxes, MNEs | L23 | centralized vs. de-centralized decisions | Steuer | Multinationales Unternehmen | Organisationsstruktur | MNEs | Theorie
    • jel: jel:F23 | jel:H25 | jel:L23
      ddc: ddc:330
    acm: ComputingMilieux_GENERAL

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.
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