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dc.contributor.authorBauer, Christian J.en_US
dc.contributor.authorLangenmayr, Dominikaen_US
dc.date.accessioned2012-11-01en_US
dc.date.accessioned2012-11-02T17:10:50Z-
dc.date.available2012-11-02T17:10:50Z-
dc.date.issued2012en_US
dc.identifier.urihttp://hdl.handle.net/10419/65847-
dc.description.abstractThis article analyzes profit taxation according to the arm's length principle in a model where heterogeneous firms sort into foreign outsourcing. We show that multinational firms are able to shift profits abroad even if they fully comply with the tax code. This is because, in equilibrium, intra-firm transactions occur in firms that are better than the market at input production. Moreover, market input prices include a mark-up that arises from the bargaining between the firm and the independent supplier. Transfer prices set at market values following the arm's length principle thus systematically exceed multinationals' marginal costs, leading to a reduction of tax payments for each unit sold. The optimal organization of firms hence provides a new rationale for the empirically observed lower tax burden of multinational corporations.en_US
dc.language.isoengen_US
dc.publisherCESifo Münchenen_US
dc.relation.ispartofseriesCESifo Working Paper: Public Finance 3967en_US
dc.subject.jelF23en_US
dc.subject.jelH25en_US
dc.subject.jelL22en_US
dc.subject.ddc330en_US
dc.subject.keywordoutsourcingen_US
dc.subject.keywordprofit taxationen_US
dc.subject.keywordtransfer pricingen_US
dc.subject.keywordarm's length principleen_US
dc.subject.keywordmultinational firmsen_US
dc.titleSorting into outsourcing: Are profits taxed at a gorilla's arm's length?en_US
dc.typeWorking Paperen_US
dc.identifier.ppn729067920en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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