Beiträge zur Jahrestagung des Vereins für Socialpolitik 2017: Alternative Geld- und Finanzarchitekturen - Session: Taxation IV D19-V2
We analyze the implications of OECD methods to regulate transfer pricing and the role of a royalty tax for abusive transfer pricing. We show: (i) Under traditional methods, mispricing of royalty payments does not affect investment, but the Transactional Profit Split Method triggers higher investment to facilitate profit shifting. (ii) Royalty taxation reduces both profit shifting and investment. (iii) A royalty tax rate below the corporate tax rate leads to overinvestment in an ACE tax system.