{"title":"Tax and tariff planning through transfer prices: The role of the head office and business unit","authors":"Saskia Kohlhase , Jacco L. Wielhouwer","doi":"10.1016/j.jacceco.2022.101568","DOIUrl":null,"url":null,"abstract":"<div><p>We study the roles of the head office (HO) and the business units (BUs) of a multinational corporation (MNC) in reducing income tax and tariff payments through internal transfer prices in international trades. Using confidential transfer price data of a large MNC, we analyze how the different elements of internal transfer prices set by the HO and BUs vary differently from external prices with income tax rates, tariff rates, and the tradeoff between the two. Absent severe agency conflicts, we find that the BUs contribute more to tax planning than the HO, despite that explicit incentives to do so are not included in the compensation schemes. The roles of the HO and BUs vary with product market competition, the risk of conflicts with tax and customs authorities, and agency problems within the firm. Moreover, we provide evidence of strategic trade cost allocations among BUs to reduce income taxes.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"75 2","pages":"Article 101568"},"PeriodicalIF":5.4000,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"6","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Accounting & Economics","FirstCategoryId":"91","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S016541012200091X","RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 6
Abstract
We study the roles of the head office (HO) and the business units (BUs) of a multinational corporation (MNC) in reducing income tax and tariff payments through internal transfer prices in international trades. Using confidential transfer price data of a large MNC, we analyze how the different elements of internal transfer prices set by the HO and BUs vary differently from external prices with income tax rates, tariff rates, and the tradeoff between the two. Absent severe agency conflicts, we find that the BUs contribute more to tax planning than the HO, despite that explicit incentives to do so are not included in the compensation schemes. The roles of the HO and BUs vary with product market competition, the risk of conflicts with tax and customs authorities, and agency problems within the firm. Moreover, we provide evidence of strategic trade cost allocations among BUs to reduce income taxes.
期刊介绍：
The Journal of Accounting and Economics encourages the application of economic theory to the explanation of accounting phenomena. It provides a forum for the publication of the highest quality manuscripts which employ economic analyses of accounting problems. A wide range of methodologies and topics are encouraged and covered: * The role of accounting within the firm; * The information content and role of accounting numbers in capital markets; * The role of accounting in financial contracts and in monitoring agency relationships; * The determination of accounting standards; * Government regulation of corporate disclosure and/or the Accounting profession; * The theory of the accounting firm.
京公网安备 11010802042870号
京ICP备2023020795号-1
分享
求助内容：
应助结果提醒方式：
扫码关注我们
