Nielsen, Søren Bo Raimondos-Møller, Pascalis Schjelderup, Guttorm
Year of Publication:
Working paper No. 10-2005
Copenhagen Business School (CBS), Department of Economics, Frederiksberg
The paper examines how country tax differences affect a multinational enterprise's choice to centralize or de-centralize its decision structure. Within a simple model that emphasizes the multiple conflicting roles of transfer prices in MNEs – here, as a strategic pre-commitment device and a tax manipulation instrument –, we show that (de-)centralized decisions are more profitable when tax differentials are (small) large.
Centralized vs. de-centralized decisions taxes MNEs