Transfer pricing policy concept model for MNEs in relation to strategic management

Abstract

Purpose: Transactions carried out in MNEs among parent companies and subsidiaries affect the achievement of the strategic and operational objectives of MNEs, their financial results, taxes paid and intra-group relations. The aim of the paper is to justify the need to extend the areas of strategic management in MNEs to include the area of tax, in particular related to the valuation of transactions between entities within a group, and the need to meet the obligations related to transfer pricing. The practical aim of the article is to propose an original transfer pricing policy model for MNEs, which may be adopted to increase the transparency of settlements and have a positive impact on operational and strategic effectiveness within groups. Design/methodology/approach: The paper is based on qualitative research. Content analysis of legal provisions and prior literature was used for the collection of relevant data for building a transfer pricing policy model. Findings: A comprehensive and consistently implemented transfer pricing policy may help in optimizing the tax structure of MNEs, as well as minimizing the risk associated with changes in tax provisions. As an instrument influencing operational relations and performance management in MNEs, it can be a significant element of the strategic management of groups. Practical implications: The research impact upon MNEs is the possibility to apply and adopt the transfer pricing policy model proposed in the paper in order to support performance management within a group. Social implications: The way multinational entities conduct their business is often perceived negatively by society due to issues of tax evasion. The implementation of a comprehensive transfer pricing policy promotes corporate tax transparency and increases employee tax awareness. Originality/value: The originality of the article stems from a coherent combination of various aspects relating to intra-group transactions into one model, which on the one hand supports the management of subsidiaries, and on the other facilitates compliance with Polish and international legal provisions. The proposed model may be subject to further development. Keywords: corporate taxation, subsidiaries, accounting, compliance, tax avoidance. Category of the paper: research paper.