Scandinavian Working Papers in Economics
Working Papers,
Copenhagen Business School, Department of Economics
No 10-2005: Centralized vs. De-centralized Multinationals and Taxes
Søren Bo Nielsen, Pascalis Raimondos-Møller and Guttorm Schjelderup
Additional contact information
Søren Bo Nielsen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Pascalis Raimondos-Møller: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Guttorm Schjelderup: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
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
17 pages, September 13, 2005
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