Optimal negotiated transfer pricing and its implications for international transfer pricing of intangibles
by Peter C. Dawson; Stephen M. Miller
International Journal of Intellectual Property Management (IJIPM), Vol. 4, No. 4, 2011

Abstract: Intangibles exhibit zero marginal licensing cost, including cross-border intra-firm licensing of intangibles within a multinational corporation (MNC). An MNC may not realise the full profit potential of licensing intangibles intra-firm, however, under suboptimal negotiated transfer pricing schemes. Our negotiated transfer pricing bargaining structure unlocks this potential by producing an optimal transfer price and larger optimal intra-firm licensed quantity. Increased licensing of intangibles intra-firm across borders produces a greater potential tax savings/consolidated after-tax profit gain per unit of transfer price adjustment, creating a context where MNCs feel a greater imperative or incentive to move beyond legal tax avoidance toward evasion.

Online publication date: Fri, 31-Oct-2014

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