Transfer Pricing or Formula Apportionment? Tax-Induced Distortions of Multinationals’ Investment and Production Decisions

For mitigating the problems of transfer pricing formula apportionment (FA) is discussed intensively. However, FA could even be more harmful than transfer pricing because income shifting would require changing economic decisions instead of just taking advantage of accounting options. We analyze the impact of different international tax allocation regimes on a corporate group’s investment and production decisions. We show that FA offsets the advantages of decision decentralization as it reverses the separation of responsibilities. It is not clear whether FA is desirable from a fiscal or an entrepreneurial perspective. The effects of FA compared to transfer pricing depend strongly on the parameter setting under consideration, especially the decision procedure within corporate groups.capital budgeting, formula apportionment, international taxation, investment incentives, multinational groups, transfer pricing

Transfer pricing or formula apportionment? Tax-induced distortions of multinationals' investment and production decisions

Multinational groups (MNGs) produce a major part of global output. Further, a substantial fraction of international transactions happens to be internal, i.e., intermediate products and services are traded between group members. Thus, the problem of co-ordinating economic decisions like investment or production within such large entities has been widely recog-nized in the theoretical and empirical literature. The findings suggest that transfer prices are a widespread device for splitting up complex decision situations and allocating the responsibility for the resulting subproblems to several decision makers. Apart from its co-ordination function transfer pricing is also used for tax purposes. Legally independent group members realize intra-group sales and contribute to a single product. Taxable group profits are often allocated among the participating companies by means of transfer prices. In this case, from the group's perspective, transfer pricing is a device of international tax planning. Of course, national tax authorities have been aware of potential misuse. In Europe, the problem has become especially severe since the mid-European countries joined the EU. Due to the emerging large tax rate differentials, tax revenues of high-tax legislations eroded. For mitigating this problem formula apportionment (FA) is discussed intensively. Under FA, a common tax base is calculated and divided among the host countries in accordance with given apportionment factors. As a consequence, earnings management fails to re-allocate profits to low-tax legislations and tax base erosion seems to be stopped. However, FA could even be more harmful than transfer pricing because under FA income shifting would require changing economic decisions instead of just taking advantage of accounting options. In addition to the erosion of tax revenues, capital investments and employment could decrease in high-tax legislations. The goal of our paper is to analyze the impact of different international tax allocation regimes on the MNG's investment and production decisions. In our theoretical model, we derive optimal decisions under transfer pricing and FA. A prominent result of our analysis is that FA offsets the advantages of decision decentralization as it reverses the separation of responsibility areas. It is not clear whether FA is desirable from a fiscal or an entrepreneurial perspective. We show that the effects of FA compared to transfer pricing depend strongly on the parameter setting under consideration. One of the most important determinants is the internal decision procedure within the MNG. --Capital budgeting,Formula apportionment,International Taxation,Investment Incentives,Multinational Groups,Transfer Pricing

Whispering-gallery mode resonators for nonlinear and quantum optical applications

Quantum information is the next frontier in communications. to realize quantum communications, the quantum mechanical properties of today\u27s best communication medium, light, must be harnessed in a scalable and efficient manner. Whispering-gallery mode resonators (WGMRs), a type of optical cavity, have advantages over traditional designs that can enhance processes used in the generation of nonclassical (quantum) states of light. In particular they reduce the power threshold for intensity-dependent nonlinear phenomena. One such process, second harmonic generation, can reduce the shot noise of light below the standard quantum limit. This dissertation explores the theoretical analysis and experimental tests of noise reduction through second harmonic generation in a crystalline whispering-gallery mode resonator. We also observe the generation of another nonlinear optical process, hyper-Raman scattering, at modest optical powers inside a crystalline WGMR. The change in optical properties of vanadium dioxide due to an optically-induced phase transition is also studied as a potential Q-switching material in a WGMR-type cavity

The Negotiation Checklist: How To Win The Battle Before It Begins

Being well-prepared going into a negotiation is key to being successful when you come out. This negotiation checklist is a tool that can maximize your preparation effectiveness and efficiency

Writing for the Medium

This collection of essays, by well known writers on the subject of writing for television, is divided into three sections, with the first one devoted to the debates on quality television. The second one focuses on literature and television. The final section examines 'Science on television', with series editors from Britain and Germany giving first-hand accounts of the scope for serious science reporting on television

Ebastine overdose in a child

The lack of side effects after acute ingestion of a high dose of ebastine in our child aging 44 months suggests an overall safety profile of ebastine; it could suggest less time of hospitalization for children who are subjected to this event

Variation of the characteristics of deltaic and stream bed deposits in laboratory studies

CER 67-68TAR-RHB-DBS34.1967.Includes bibliographical references (page 15).This paper discusses the major processes that influence the distribution and characteristics of sedimentary deposits in deltaic systems (stream channel and delta). The distributions of the sediment sizes in the sedimentary deposits in several laboratory deltaic systems formed under steady-state conditions were determined. Statistical moments of the sediment size distribution were calculated and some explanations of their characteristics are given. Two size ranges of cohesionless sediments were use, along with several water discharges. The laboratory deltas were characterized by the classical top-, fore-, and bottom-set beds. Two- and three-dimensional deltas were analyzed and the relationships between the two are discussed. This paper should be of particular interest to the hydrologist, hydraulic engineer and sedimentologist whose interests include flow conditions that can be associated with a sedimentary deposit, rate of depositions in reservoirs, water resources development and sediment yield from rivers and river systems

An unusual new mammal from the Early Eocene of Wyoming

A newly discovered maxillary dentition from the Early Eocene rocks of the Bighorn Basin, Wyoming, is unlike that of any mammal previously known from this intensively collected region. It represents a new genus and species, here named Alocodon atopum. The new form bears superficial resemblance to various mammals, but specific features suggest a real relationship only to palaeanodonts, particularly Tubulodon taylori, aformof uncertain family ties, and the epoicotheriid Pentapassalus pearcei. The most significant features of the molars are their cylindrical shape, their odd cusp arrangement, and their reduced enamel. Because of its similarity to Tubulodon, Alocodon is tentatively allocated here to the Epoicotheriidae (Pholidota, Palaeanodonta). If correctly assigned, it represents the oldest known member of this poorly represented family and the first from the Bighorn Basin

Imaging the Electric Field with X-Ray Diffraction Microscopy

The properties of semiconductors and functional dielectrics are defined by their response in electric fields, which may be perturbed by defects and the strain they generate. In this work, we demonstrate how diffraction-based X-ray microscopy techniques may be utilized to image the electric field in insulating crystalline materials. By analysing a prototypical ferro- and piezoelectric material, BaTiO$_{3}$, we identify trends that can guide experimental design towards imaging the electric field using any diffraction-based X-ray microscopy technique. We explain these trends in the context of dark-field X-ray microscopy, but the framework is also valid for Bragg scanning probe X-ray microscopy, Bragg coherent diffraction imaging and Bragg X-ray ptychography. The ability to quantify electric field distributions alongside the defects and strain already accessible via these techniques offers a more comprehensive picture of the often complex structure-property relationships that exist in many insulating and semiconducting materials