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Inefficiencies of Bilateral Advanced Pricing Agreements (BAPA) in Taxing Multinational Companies

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  • Tomohara, Akinori

Abstract

While regulations on tax evasion via transfer pricing have been thoroughly explored in the literature, little is known about the effects of domestic tax policies under a Bilateral Advanced Price Agreement (hereafter BAPA) on production decisions of multinational companies. I show that, even if BAPAs prohibit income shifting through transfer pricing, inefficiencies arise via distorted production when markets across countries are interrelated through intra–firm trade of multinational companies. The analysis provides governments with useful guidance for how to coordinate tax agreements.

Suggested Citation

  • Tomohara, Akinori, 2004. "Inefficiencies of Bilateral Advanced Pricing Agreements (BAPA) in Taxing Multinational Companies," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(4), pages 863-873, December.
    • Handle: RePEc:ntj:journl:v:57:y:2004:i:4:p:863-73
    DOI: 10.17310/ntj.2004.4.05
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    Cited by:

    1. Lisa De Simone & Lillian F. Mills & Bridget Stomberg, 2019. "Using IRS data to identify income shifting to foreign affiliates," Review of Accounting Studies, Springer, vol. 24(2), pages 694-730, June.
    2. Becker, Johannes & Davies, Ronald B. & Jakobs, Gitte, 2017. "The economics of advance pricing agreements," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 255-268.
    3. Vaithilingam, Santha & Nair, Mahendhiran, 2009. "Mapping global money laundering trends: Lessons from the pace setters," Research in International Business and Finance, Elsevier, vol. 23(1), pages 18-30, January.

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