Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103143
Authors: 
Nielsen, Søren Bo
Schindler, Dirk
Schjelderup, Guttorm
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4975
Abstract: 
We demonstrate that the choice of the transfer price and its effect on intra-firm trade and investment depends on the probability of detection and thus on the measure, on which tax authorities base their audit. A policy implication of the paper is that it should be preferable to condition audits on the amount of income shifted rather than on the distortion of the transfer price proper. Another policy finding is that improving the quality of tax law might be superior to higher detection effort. The former reduces profit shifting and concealment effort, whereas the latter leads to more wasteful use of resources on concealment and has an ambiguous effect on profits shifted.
Subjects: 
transfer pricing
investment
concealment costs
economic activity
JEL: 
H25
Document Type: 
Working Paper

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