Transfer pricing: Intangibles, uncertainty and tax minimization




Poe, April

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This study is motivated by regulatory concerns that U.S. based multinational enterprises use transfer pricing to generate income tax savings beyond levels expected by taxing authorities.

Essay 1 examines whether the presence of intangibles (balance sheet and R&D measures) enables multinational enterprises to benefit from transfer pricing of cross border transactions due to difficulty in establishing arm's length pricing for unique assets. I expect that companies with a higher composition of intangible assets reduce their income tax burden relative to industry peers.

Essay 2 focuses on uncertainty in transfer pricing. For products with external markets, the transfer price range narrows compared to that for unique assets due to comparable sales. I study two industries at opposing ends of the uncertainty spectrum for transfer pricing and expect that companies with more flexibility in establishing transfer pricing benefit from a lower worldwide effective tax rate.


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intangible, tax, Transfer pricing