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The Economics of Advance Pricing Agreements

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Download WP14_19.pdf899.09 KB
Author(s)
Becker, Johannes 
Davies, Ronald B. 
Jakobs, Gitte 
Uri
http://hdl.handle.net/10197/6151
Date Issued
November 2014
Date Available
12T10:31:25Z November 2014
Abstract
Advance pricing agreements (APAs) determine transfer prices for intra-firm transactions in advance. This paper interprets these contracts as a means to overcome a hold-up problem that occurs because governments cannot commit to non-excessive future tax rates. In addition, with private information, just as in practice, our APAs will be complex and require lengthy negotiations. Never- theless, implemented APAs lead to a Pareto improvement even when all agents are risk neutral. However, not all efficient APAs are concluded in equilibrium. International agreements to avoid double taxation will likely reduce the number of realized APAs.
Type of Material
Working Paper
Publisher
University College Dublin. School of Economics
Series
UCD Centre for Economic Research Working Paper Series
WP14/19
Copyright (Published Version)
2014 the authors
Keywords
  • Advance pricing agree...

  • Corporate taxation

  • Multinational firms

  • Transfer pricing

Web versions
http://www.ucd.ie/t4cms/WP14_19.pdf
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
https://creativecommons.org/licenses/by-nc-nd/3.0/ie/
Owning collection
Economics Working Papers & Policy Papers
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