Abstract

The paper examines how country tax dierences aect a multinational enter- prise's choice to centralize or de-centralize its decision structure. Within a simple model that emphasizes the multiple con‡icting roles of transfer prices in MNEs - here, as a strategic pre-commitment device and a tax manipulation instrument -, we show that (de-)centralized decisions are more pro…table when tax dierentials are (small) large.

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