This paper investigates how concealment costs of transfer pricing and the probability of detection affect transfer pricing and firm behavior. We find that transfer pricing in intermediate production factors does not affect real activity of a multinational firm if the firm's concealment effort as...

This chapter provides a description of one of the key anti-tax-avoidance rules to combat profit shifting by multinational corporations, so called Controlled Foreign Corporation (CFC) rules that directly target income in low-tax countries. We explain some key institutional features of CFC...

This study develops theory and discusses implications of flexibility in income shifting for multinational corporations that have both profit- and loss-making affiliates. Our theoretical model shows that when multinationals do not have flexibility to adjust their income-shifting strategies within...

This study examines the flexibility of multinational firms to adjust their income-shifting strategies -- whether using transfer pricing or internal debt -- during the tax year to react to affiliates' operating losses. We develop the concept that under flexibility, multinationals can adjust their...

By introducing controlled-foreign-company (CFC) rules, the parent country of a multinational firm reserves the right to tax the income of the firm's foreign affiliates if the tax rate in the affiliate's host country is below a specified threshold. We identify the conditions under which binding...

By introducing controlled-foreign-company (CFC) rules, the parent country of a multinational firm reserves the right to tax the income of the firm's foreign affiliates if the tax rate in the affiliate's host country is below a specified threshold. We identify the conditions under which binding...