[PDF] Transfer Pricing In Vertically Integrated Industries eBook

Author : Thomas A. Gresik
Publisher :
Page : 0 pages
File Size : 14,13 MB
Release : 2011
Category :
ISBN :

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Tax officials judge whether a multinational's transfer price is consistent with the arm's-length standard, the price at which two independent firms would carry out a similar transaction, by using data from comparable but independent transactions. In vertically integrated industries, the only source of comparable data may be from controlled (non-independent) transactions. Conventional wisdom asserts that standard arm's-length methods cannot perform well in such markets because the comparability rules encourage the integrated firms to collude tacitly on transfer prices in a way that amplifies tax-differential incentives. In this paper, we show that strategic linkages between vertically integrated firms operating in the same final good market moderate, and can possibly reverse, tax-differential incentives if the correct comparison method is used.The Cost-Plus method turns out to be the most effective in limiting the equilibrium amount of profit-shifting out of the high-tax country and it yields the highest tax revenues for the high-tax country. These benefits are shown to strengthen when the firms have private cost information.

Author : Yeong Heok Lee
Publisher : Routledge
Page : 136 pages
File Size : 13,51 MB
Release : 2018-08-06
Category : Business & Economics
ISBN : 0429852177

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Originally published in 1994 this volume investigates the relationship between a firm's decision to integrate vertically and its research and development (R & D) strategy. Literature on vertical integration is reviewed and a framework presented to analyze the costs and benefits of vertical integration. The theoretical basis for the proposed hypostheses is investigated and the hypotheses tested empirically.

Author : Roger D. Blair
Publisher : Academic Press
Page : 224 pages
File Size : 35,67 MB
Release : 2014-05-10
Category : Business & Economics
ISBN : 1483261093

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Law and Economics of Vertical Integration and Control focuses on the processes, methodologies, and approaches involved in the law and economics of vertical integration and control. The publication first elaborates on transaction costs, fixed proportions and contractual alternatives, and variable proportions and contractual alternatives. Discussions focus on sales revenue royalties, ownership integration, output royalties, important product-specific services, successive monopoly, advantages and limitations of internal transfers, and transaction cost determinants. The text then examines vertical integration under uncertainty and vertical integration without contractual alternatives. The book ponders on legal treatment of ownership integration and per se illegal contractual controls. Topics include tying arrangements, public policy assessment, resale price maintenance, vertical integration and the Sherman Act, market foreclosure doctrine, and the 1982 Merger Guidelines. The text also takes a look at contractual controls that are not illegal per se, alternative legal rules, and antitrust policy. The publication is a dependable reference for researchers interested in the law and economics of vertical integration and control.

Author : Winston W. Chang
Publisher :
Page : 32 pages
File Size : 47,17 MB
Release : 2016
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ISBN :

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The objective of this paper is to find the significant factors that crucially affect a firm's optimal transfer pricing policy. To achieve such a goal, it suffices to examine three minimalist vertical models: the first one contains a vertically integrated monopoly in both input and output markets, the second one consists of a vertically integrated firm that monopolizes an intermediate input for its own and rival's downstream divisions, and the third one comprises two vertically integrated firms competing in a final goods market. Four modes of competition are considered: Cournot, Bertrand, Stackelberg quantity and Stackelberg price. The paper shows that the optimal transfer pricing policy depends on four specifications: the vertical structure, the production technology, the demand characteristics and the competition mode. It finds numerous patterns on optimal transfer pricing: for example, under the same demand structure and competition mode, the two vertical models can yield diametrically opposite transfer pricing strategies; within a given vertical model, different competition modes may yield the same or different optimal strategies; and within a given competition mode, the four possible pairings of ordinary substitutes/complements on the demand side and strategic substitutes/complements on the firm side can also produce quite different results. In addition, the paper illustrates how the optimal transfer pricing policy is affected when the additional factors of income tax and tariff distortions are considered. With all the significant factors affecting the optimal transfer pricing delineated, the paper has laid a foundation for further studies in transfer pricing under more general structures. An important implication of our results is that the optimal transfer pricing policy may not be simply determined by the common practice of shifting profits from high- to low-tax jurisdictions.

Author : Erik Wintzer
Publisher : GRIN Verlag
Page : 61 pages
File Size : 44,59 MB
Release : 2007-08
Category : Business & Economics
ISBN : 3638698106

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Diploma Thesis from the year 2003 in the subject Business economics - Accounting and Taxes, grade: 2,0 (B), Schmalkalden University of Applied Sciences (Economics), course: Cost Pricing und Controlling, 121 entries in the bibliography, language: English, abstract: Globalization of business has replaced the concept of national exchanges with global transactions. Consequently, the changes due to globalization play a big role in the strategy of multinational enterprises. The volume of intrafirm trade is huge and expanding rapidly as multinationals globalize their investment and trade. Today, a considerable proportion of world trade takes place within multinational enterprises. This indicates the importance of transfer pricing conspicuously. The intention of this book is to describe the challenge of transfer pricing holistically and to exhibit some options for multinational enterprises determining their transfer prices. While management accounting as well as strategic aspects of transfer prices are also relevant for enterprises, which are not multinational, external aspects (specifically tax accounting) are typically only crucial for multinationals. This book is an attempt to integrate all aspects of transfer pricing targeting practitioners as well as economists.

Author : Robert F. Göx
Publisher :
Page : 29 pages
File Size : 25,1 MB
Release : 2000
Category :
ISBN :

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This paper analyzes the use of transfer pricing as a strategic device in divisionalized firms facing duopolistic price competition. When transfer prices are observable, both firms' headquarters will exclude their marketing division from the external input market and charge a transfer price above the market price of the intermediate product to induce their marketing managers to behave as softer competitors on the final product market. When transfer prices are not observable, strategic transfer pricing is not an equilibrium, and the optimal transfer price equals the market price of the intermediate product. As an alternative, the firms can signal their competitor a transfer price above the market price of the intermediate input through a proper choice of their accounting system. The paper identifies conditions under which the choice of absorption costing is a dominant strategy for both firms. Moreover, when the firms' products are close substitutes, the strategic benefits of full cost based transfer pricing can provide incentives to maintain a production department that would not be able to survive as a separate firm in the long run.