Transfer Pricing of Intrafirm Sales as a Profit Shifting Channel – Evidence from German Firm Data

Overesch, Michael

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URL:	https://ub-madoc.bib.uni-mannheim.de/1467
URN:	urn:nbn:de:bsz:180-madoc-14671
Document Type:	Working paper
Year of publication:	2006
The title of a journal, publication series:	ZEW Discussion Papers
Volume:	06-084
Place of publication:	Mannheim
Publication language:	English
Institution:	Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series:	Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject:	330 Economics
Classification:	JEL: H32 H26 H25 ,
Subject headings (SWD):	Steuer , Multinationales Unternehmen , Gewinnverlagerung
Keywords (English):	Taxation , Multinationals , Profit Shifting , Transfer Pricing , Firm-level Data
Abstract:	This paper investigates whether transfer pricing of intrafirm sales within multinationals represents an important channel of company tax planning. A simple theoretical model, considering profit shifting activities of a multinational company, is used to obtain empirical implications. The empirical analysis, based on a panel of German multinationals, considers directly the supposed tax response of intrafirm sales. The analysis shows a significantly negative impact of the local tax rate on the size of balance sheet items, which reflect intrafirm sales. Thus, the results suggest that transfer pricing of intrafirm sales constitutes an important channel of companies’ profit shifting activities.
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