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Abstract:
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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.
Keywords: Centralized vs. de-centralized decisions, taxes, MNEs.
JEL-Classification: H25, F23, L23. |
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