Title: Transfer pricing strategies and management performance of MNEs

Authors: Tsai-Mei Lin, Yi-Ling Chen, Binshan Lin

Addresses: College of Business Administration, Institute of International Business Administration, Chinese Culture University, 55 Hwa-Kang Road, Yang-Ming-Shan, Taipei 11114, Taiwan, ROC. ' Department of Accounting, Shih Chien University, 70 Ta-Chih Street, Chung-Shan District, Taipei, Taiwan, ROC. ' BellSouth Corporation, BE 321, Louisiana State University, Shreveport, LA 71115, USA

Abstract: This paper aims to explore the adoption attitudes of internal and external motivations by multinational enterprises (MNEs) concerning transfer pricing. We conduct an empirical study on the influence of transfer pricing strategies of MNEs on the perception of the level of tax rates of host countries. This research found that Holland-based MNEs are most likely to adopt transfer pricing strategies, while Japan-based MNEs are least likely. For the purpose of reducing income tax burden, the US-based MNEs are most likely to adopt, followed by Japan-based MNEs. The Japan-based MNEs are most likely to adopt transfer pricing strategies, as due to internal motivations, followed by Holland-based MNEs. The same applies to external motivations. The MNEs managements agree that with higher tariff rates of the host country, they are more likely to adopt low quotes in transfer pricing strategies to maintain the profits in the subsidiaries of the host country. If the income tax rates of the host country are higher, the managements are more likely to adopt high quotes in transfer pricing strategies to retain profits in the host country by reducing operational performances of subsidiaries.

Keywords: international tax planning; transfer pricing; MNEs; multinational enterprises; strategic management; competitive effectiveness; management performance; host countries; taxation; Holland; Netherlands; Japan; income tax; tariff rates; internal motivation; external motivation; profits; profitability; subsidiaries; subsidiary companies; operational performance; enterprise development.

DOI: 10.1504/IJMED.2010.031544

International Journal of Management and Enterprise Development, 2010 Vol.8 No.2, pp.117 - 134

Published online: 10 Feb 2010 *

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