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Department of Economics, Copenhagen Business School Working Paper Series, Department of Economics, Copenhagen Business School

No 10-2005:
Centralized vs. De-centralized Multinationals and Taxes

Søren Bo Nielsen, Pascalis Raimondos-Møller and Guttorm Schjelderup

Abstract: 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; (follow links to similar papers)

JEL-Codes: F23; H25; L23; (follow links to similar papers)

17 pages, September 13, 2005

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