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Article
Managerial autonomy and tax compliance : an empirical study on international transfer pricing
Journal of the American Taxation Association (2006)
  • Koon Hung CHAN, Lingnan University, Hong Kong
  • Agnes W. Y. LO, Lingnan University, Hong Kong
  • Phyllis Lai Lan MO, Lingnan University, Hong Kong
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.

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