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Nielsen, Søren Bo
Raimondos-Møller, Pascalis
Schjelderup, Guttorm
Year of Publication: 
Series/Report no.: 
EPRU Working Paper Series 2001-05
This paper demonstrates that under conditions of imperfect (oligopolistic) competition, a transition from separate accounting (SA) to formula apportionment (FA) does not eliminate the problem of profit shifting via transfer pricing. In particular, if affiliates of a multinational firm face oligopolistic competition, it is beneficial for the multinational to manupulate transfer prices for tax-saving as well as strategic reasons under both FA and SA. The analysis shows that a switch from SA rules to FA rules may actually strengthen profit shifting activities by multinationals.
Document Type: 
Working Paper

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