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Transfer pricing and economic functions analysis: the Japanese paradigm

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  • Peter Buckley
  • Jane Frecknall Hughes

Abstract

This paper examines the difficulties facing tax authorities in valuing cross-border flows from a transactions based analysis, in conditions where intangibles and services are important and where the multinational firm concerned is operating a system in which group-wide economic functions dominate decision making. Its key contention is that the economic functions of any entity should be examined in order to determine whether transactions analysis can be used to produce an acceptable value. This is done in the particular context of Japanese multinational enterprises and uses two hypothetical situations to demonstrate the inadequacy of transactions based analysis as a panacea for transfer pricing problems, especially for transfers of value involving intangibles and services, which it redefines into two categories, perceptible and imperceptible.

Suggested Citation

  • Peter Buckley & Jane Frecknall Hughes, 1998. "Transfer pricing and economic functions analysis: the Japanese paradigm," Applied Economics, Taylor & Francis Journals, vol. 30(5), pages 621-629.
    • Handle: RePEc:taf:applec:v:30:y:1998:i:5:p:621-629
    DOI: 10.1080/000368498325615
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    References listed on IDEAS

    as
    1. Peter Buckley & Jane Frecknall Hughes, 1997. "Japanese transfer pricing policy: a note," Applied Economics Letters, Taylor & Francis Journals, vol. 4(1), pages 13-17.
    2. Cravens, Karen S., 1997. "Examining the role of transfer pricing as a strategy for multinational firms," International Business Review, Elsevier, vol. 6(2), pages 127-145, April.
    3. Chris Higson & Jamie Elliott, 1994. "The incentive to locate a multinational firm: The effect of tax reforms in the United Kingdom," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 1(1), pages 81-97, February.
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