Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129336
Authors: 
Becker, Johannes
Davies, Ronald B.
Year of Publication: 
2015
Series/Report no.: 
Working Paper Series, UCD Centre for Economic Research 15/27
Abstract: 
The predominant model of tax induced transfer pricing is based on the assumption that profit shifting is due to insufficient enforcement. However, evidence shows that the firms responsible for most profit shifting are also among the most frequently audited. We present an alternative model based on negotiations that avoid costly, yet uncertain, formal proceedings (e.g. court procedures). This model predicts that profit shifting increases in the tax gap even though enforcement is perfect. Further, it suggests that current efforts to streamline international tax law may have the unintended effect of increasing profit shifting.
Subjects: 
transfer pricing
Nash bargaining
tax avoidance
corporate taxation
JEL: 
H25
H32
H87
Document Type: 
Working Paper

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