Overhead cost allocation changes in a transfer pricing tax compliant multinational enterprise |
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Authors: | Christian Plesner Rossing Carsten Rohde |
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Institution: | Department of Accounting and Auditing, Copenhagen Business School, Solbjerg Plads 3, C4, DK-2000 Frederiksberg, Denmark |
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Abstract: | This paper addresses how overhead cost allocation system design in multinational enterprises (MNEs) is affected by transfer pricing tax regulation. Using a case study research strategy we find that the implementation of a transfer pricing tax compliance strategy gives rise to a number of changes to the overhead cost allocation system design. Findings suggests that a contingent relationship exists between overhead cost allocation and transfer pricing tax compliance. We argue that when seeking to understand and explain MNEs’ overhead cost allocation system design for intra-company services, the MNEs’ response to its tax regulatory environment is a significant explanatory variable. |
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