Title

Managerial autonomy and tax compliance : an empirical study on international transfer pricing

Document Type

Journal article

Source Publication

Journal of the American Taxation Association

Publication Date

Fall 1-1-2006

Volume

28

Issue

2

First Page

1

Last Page

22

Abstract

This paper examines the impact of managerial autonomy on tax compliance in an international transfer pricing context. Specifically, we study whether foreign subsidiaries' autonomy in making pricing and sourcing decisions on intrafirm transfers affect their profit shifting through international transfer pricing. We measure transfer pricing noncompliance in terms of tax audit adjustments made by tax authorities. Based on a sample of 163 transfer pricing audits on foreign investment enterprises (FIEs) in China, we find that tax audit adjustments for FIEs that have autonomy in setting transfer prices or sourcing from outsiders are smaller than those that have their transfer transactions dictated by parent companies.

DOI

10.2308/jata.2006.28.2.1

Print ISSN

01989073

E-ISSN

15588017

Publisher Statement

Copyright © 2006 American Accounting Association

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Recommended Citation

Chan, K. H., Lo, A. W. Y., & Mo, P. L. L. (2006). Managerial autonomy and tax compliance: An empirical study on international transfer pricing. Journal of the American Taxation Association, 28(2), 1-22. doi: 10.2308/jata.2006.28.2.1