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Are Multinational Sales to Affiliates in High Tax Countries Overpriced? A Simple Illustration
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Are Multinational Sales to Affiliates in High Tax Countries Overpriced? A Simple Illustration

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Abstract

Empirical evidence of transfer pricing suggests that US sales to affiliates based in low taxed countries are underpriced. The argument has been made that, by symmetry, US sales to affiliates in high tax countries are overpriced. We show that this symmetry assumption is far from certain once realistic assumptions of international tax principles and laws are applied and a non zero import tariff by the foreign country is introduced into a simple model of transfer pricing.

Suggested Citation

  • Rajan, Ramkishen S., 2000. "Are Multinational Sales to Affiliates in High Tax Countries Overpriced? A Simple Illustration," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 53(4), pages 551-557.
    • Handle: RePEc:ris:ecoint:0236
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    More about this item

    Keywords

    Multinational enterprises; tariffs; taxation; trade; transfer pricing;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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