Taxes, Transfer Pricing, and the Multinational Enterprise

Lorraine Eden

in Oxford Handbook of International Business

Published in print August 2001 | ISBN: 9780199241828
Published online November 2003 | e-ISBN: 9780191596834 | DOI:
Taxes, Transfer Pricing, and the Multinational Enterprise

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An outline is given of the complex issue of transfer pricing (the cross‐border intra‐firm transactions between related parties), as seen by multinational enterprises (MNE) managers and by governments faced with the task of taxing business profits. First, transfer pricing from the MNE's perspective, and the problems that this raises for national governments, are briefly discussed. The basic rules of international taxation as they apply to MNE profits are then reviewed. The specific rules and procedures that apply to transfer pricing, as practised in the USA and recommended by the OECD, are then outlined. The rest of the chapter discusses an alternative approach to taxing MNEs—the arm's length standard, which is based on separate accounting or the separate entity approach, and outlines future trends that are likely to have major impacts—globalization, regionalization, and the Internet.

Keywords: accounting; international taxation; multinational enterprises; OECD; taxation; transfer pricing; USA

Chapter.  10769 words.  Illustrated.

Subjects: International Economics

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