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Transfer Pricing and Strategic Taxation of Globally Joint Inputs

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  • Konan, Denise Eby

Abstract

This paper models strategic taxation policy of home and host governments when a multinational enterprise sets transfer prices on globally joint inputs such as research and development. Tax credit and deduction allowances, as well as no taxation of foreign-earned profits, result in identical optimal transfer-price solutions and national income effects in both countries. An equilibrium home-tax solution is to tax foreign-earned profits at a higher rate than domestically earned profits. The multinational responds by shifting profits abroad through transfer-pricing mechanisms. Copyright 1996 by Blackwell Publishing Ltd.

Suggested Citation

  • Konan, Denise Eby, 1996. "Transfer Pricing and Strategic Taxation of Globally Joint Inputs," Review of International Economics, Wiley Blackwell, vol. 4(2), pages 202-210, June.
    • Handle: RePEc:bla:reviec:v:4:y:1996:i:2:p:202-10
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    Cited by:

    1. Kind, Hans Jarle & Midelfart, Karen Helene & Schjelderup, Guttorm, 2005. "Corporate tax systems, multinational enterprises, and economic integration," Journal of International Economics, Elsevier, vol. 65(2), pages 507-521, March.
    2. Guttorm Schjelderup, 1999. "Multinationals, Intra-Firm Trade and the Taxation of Foreign-Source Income," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(1), pages 93-105.
    3. Denise Eby Konan, 2000. "The Vertical Multinational Enterprise and International Trade," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 113-125, February.
    4. repec:otg:wpaper:1403 is not listed on IDEAS

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