Geographic Income Shifting by Multinational Corporations in Response to Tax Rate Changes

Klassen, Kenneth J.; Lang, Mark H.; Wolfson, Mark A.

doi:10.2307/2491168

Cited by 267 publications

(168 citation statements)

References 13 publications

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“…The study of cross-border transfer pricing in MNEs traditionally has a place in other streams of the literature: tax law studies discuss the variety in national tax regimes, tax compliance requirements, and the optimal transfer pricing method from a fiscal point of view (Kroppen & Eigelshoven, 1998;Levey, Brandman & Miesel, 2001;Swenson 2001;Van Mens & Porquet, 2001;Douvier, 2005;etc). Tax accounting studies investigate the degree to which national tax rate differentials lead to transfer pricing manipulation and income shifting (Harris, Kriebel & Raviv, 1982;Jensen, 1986;Halpirin & Srinidhi, 1987Grubert & Mutti, 1989;Klassen, Lang & Wolfson, 1993;Harris, 1993;Jacob, 1996;Swenson, 2001;Gupta & Mills, 2002;etc.). An alternative perspective is provided by the contingency literature: it identifies the objectives of the transfer pricing policy and the organisational and environmental factors that determine the (international) transfer pricing method.…”

Section: Introductionmentioning

confidence: 99%

Management control in the transfer pricing tax compliant multinational enterprise

Cools¹,

Emmanuel

Jorissen

2008

Accounting, Organizations and Society

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To understand the design and use of management control systems (MCSs) in tax compliant multinational enterprises (MNE), an in-depth case study was undertaken. The selected MNE chose to use the same transfer prices for tax compliance and internal management purposes. We argue that modifications in the MCS cannot be understood without an appreciation of the corporate approach towards fiscal transfer pricing compliance.Over a sustained period of time, the effect on organising, planning , evaluation and reward controls are traced suggesting a more coercive use of the MCS. Three propositions are offered to guide future research in this complex area.

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Section: Introductionmentioning

confidence: 99%

Management control in the transfer pricing tax compliant multinational enterprise

Cools¹,

Emmanuel

Jorissen

2008

Accounting, Organizations and Society

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“…Harris (1993) and Klassen et al (1993) both investigate whether the 1986 Tax Act affected income shifting behavior. Harris (1993) finds that the 86 Act's reduction in the statutory tax rate led firms to move income into the U.S.…”

Section: Empirical Evidencementioning

confidence: 99%

“…Harris (1993) finds that the 86 Act's reduction in the statutory tax rate led firms to move income into the U.S. Incremental to Harris (1993), Klassen et al (1993) investigates other countries' tax rate changes in conjunction with the U.S. tax rate decrease. Klassen et al finds evidence that U.S. MNCs shifted from (to) the U.S. to Europe (from Canada) in 1985 and 1986.…”

Section: Empirical Evidencementioning

confidence: 99%

The Taxation of Multinational Corporations

Blouin

1996

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Multinational taxation is an area of research that encompasses academics in accounting, finance and economics. In particular, researchers are interested in determining whether taxation alters where multinational corporations (MNCs) operate their businesses. A review of the literature on foreign direct investment provides clear support for taxes influencing MNCs' location decisions. In addition, MNCs appear to organize themselves in a manner to increase the amount of their profitsinvested in relatively lightly taxed jurisdictions. By altering the location and the character of income across jurisdictions, MNCs are able to reduce their tax burdens. The natural extension of these lines of research, then, is determining the welfare consequences of MNCs' sensitivity to taxation. This review aggregates the large body of international tax literature succinctly in one location. Very little of what is incorporated in this piece is novel. Rather, it borrows heavily from those researchers who have focused their careers on understanding taxation in the multinational context. Unfortunately, because the research in this area is dominated by work involving U.S. data, the review is also quite U.S.-centric. However, many countries' multinational tax rules are quite similar. This is primarily attributable to the conformity generated in tax treaties based on the model treaty outlined by the Organization for Economic Cooperation and Development (OECD). So, although there is variation in specific tax rules across jurisdictions, the basic tax rules are very homogeneous.

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“…According to [56], the multinational company tends to transfer the profit to its affiliation company which operate in another countries because the tax are lower. The diversion might be in the various ways.…”

Section: Introductionmentioning

confidence: 99%

The Influence of Income Shifting Incentives towards The Tax Haven Country Utilization: Case Study on the Companies listed in Indonesian Stock Exchange

Nurhidayati

Fuadillah

2018

jak

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This study aims to determine the association between a series of income shifting incentives, including multinationality, transfer pricing aggressiveness, thin capitalization, intangible assets, and tax haven country utilization. This study is based on a sample of 78 multinational companies listed on the Indonesia Stock Exchange over 2012-2016 period (390 firm-year). The results prove that, multinationality, thin capitalization, intangible asset are positively associated with tax haven utilization, while transfer pricing aggressiveness is not positively associated with tax haven utilization. Based on the additional analysis, basic and chemicals sectors have the highest association between a series of income shifting incentives and tax haven utilization among other industrial sectors and each industry sector has different ways of utilizing tax haven country. The findings of this study are expected to provide input to the Directorate General of Taxes the importance of reviewing debt to equity ratio rule which turned out to be one gap for the taxpayer and in making the proposed inspection plan and the potential thematic exploration related to profit shifting incentives more focused on basic industry and chemicals sector. The Directorate General of Taxes also needs to raise awareness of the taxpayers of agriculture, mining, basic and chemicals, and trade, service and investment, which has a growing number of subsidiaries in tax haven country. Increased supervision of intangible assets transfers in the agriculture and infrastructure, utilities & transportation sectors also needs to be done.

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Geographic Income Shifting by Multinational Corporations in Response to Tax Rate Changes

Cited by 267 publications

References 13 publications

Management control in the transfer pricing tax compliant multinational enterprise

Management control in the transfer pricing tax compliant multinational enterprise

The Taxation of Multinational Corporations

The Influence of Income Shifting Incentives towards The Tax Haven Country Utilization: Case Study on the Companies listed in Indonesian Stock Exchange

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