Transfer Pricing in Supply Chains: An Exercise in Internal Marketing and Cost Management

2002 ◽  
pp. 147-163 ◽  
Author(s):  
Messaoud Mehafdi
Keyword(s):  
Supply Chains ◽  
Cost Management ◽  
Transfer Pricing ◽  
Internal Marketing

scholarly journals THE EFFECT OF INTERNAL COST MANAGEMENT, INTEGRATION OF EXTERNAL AND INTERNAL INFORMATION SYSTEMS, AND FIBER CAPACITY ON INTER-ORGANIZATIONAL COST MANAGEMENT IN SUPPLY CHAINS (Empirical Studies in Manufacturing Companies in The Province of Banten)

2020 ◽  
Vol 5 (1) ◽  
pp. 89-97
Author(s):  
Gugun Gunawan
Keyword(s):  
Supply Chains ◽  
Absorptive Capacity ◽  
Structural Equation ◽  
Cost Management ◽  
Theory And Practice ◽  
Equation Modeling ◽  
Management Approach ◽  
Manufacturing Companies ◽  
Electronic Integration ◽  
Organizational Costs

Inter-organizational cost management is a strategic cost management approach to managing costs that span organizational boundaries in supply chains. Drawing on the resourcebased view of the firm, we develop a model to predict which inter-related resources might enable companies to manage inter-organizational costs. We test this model using a survey of managerial accountants whose organizations are part of a supply chain. Using structural equation modeling, we conclude that the resources of internal electronic integration, external electronic integration, internal cost management, and absorptive capacity play significant direct and indirect roles in the development of an inter-organizational cost management (IOCM) resource. We find that these resources are inter-related and together are useful in enabling companies to ultimately benefit from managing inter-organizational costs. We find in particular the importance of relational resources associated with absorptive capacity in the development of an IOCM resource. Our research contributes to theory and practice by explaining how specific resources can be combined in allowing companies to better manage inter-organizational costs. Data were analyzed using SEM with the aid SmartPLS software version 3.0

Full-Cost Transfer Pricing and Cost Management

2016 ◽  
Vol 28 (3) ◽  
pp. 63-81 ◽  
Author(s):  
Jan Bouwens ◽  
Bert Steens
Keyword(s):  
Cost Management ◽  
Transfer Pricing ◽  
Data Availability ◽  
Credible Commitment ◽  
Risk Of Falling ◽  
Full Cost ◽  
Cost Cutting ◽  
Death Spiral ◽  
Transfer Prices ◽  
Jel Classifications

ABSTRACT Full-cost transfer pricing has been criticized for providing production units with insufficient incentives to economize. Our empirical study based on data from a large producer of consumer goods shows that charging full-cost transfer prices to downstream sales units can send upstream production units into a death spiral. However, our results also suggest that production units reduce costs to prevent the death spiral. We observe that managers focus their cost-cutting efforts on unit variable costs and on products with the best sales prospects. These results also suggest that, when production units are at risk of falling into a death spiral, full-cost transfer pricing can serve as a credible commitment device to motivate managers to reduce costs. JEL Classifications: D24; M31; M41; M50. Data Availability: We were given the opportunity to work with a company's proprietary database that contains sensitive and classified data that cannot be disclosed due to a non-disclosure agreement. At the start of our research, the company agreed to be referred to as Carepro, which is fictitious and does not correspond to any other existing company with that same or a similar name.

scholarly journals Amazon, Medtronic, the OECD on Risk Analysis: Thesis on Transfer Pricing

2017 ◽  
Author(s):  
Charles Edward Andrew Lincoln
Keyword(s):  
Supply Chains ◽  
Transfer Pricing ◽  
The United States ◽  
The Other ◽  
Profit Shifting ◽  
Agency Relationships ◽  
Other Hand ◽  
International Tax ◽  
Tax Court ◽  
The U.S

The mission of this thesis is to demonstrate the diverging adherence to contracts of the OECD and US in risk allocation for transfer pricing purposes as featured in BEPS Actions 8-10. The OECD adopts a principal of objective behavioral—non-agency—analysis of economic activity, which is impracticable and unworkable. The OECD denies that accurate legal contracts accurately delineate legal relationship. This implies an inherent fraud in corporate business management, which if true would be criminal in most countries—the OECD is implying everything in writing is a lie. The OECD denies the tax implications of principle-agent legal agency relationships as defined by contract law in its transfer pricing recommendations. On the other hand, the U.S. Tax Court still looks to the agency relationships between corporate entities. The U.S. Tax Court follows the correct approach.Corporate management can be divided between principle and agents. People usually think about management and shareholders, but there are also risk managers and asset managers that can be bifurcated. In terms of management, the bottom of the hierarchy is the managers of the factories. The capital fund managers or the shareholders have all the power—it will be taxed here not at the managers of the factories. The managers at the top of the hierarchy will get the highest level of remuneration. Reliance on contract is the only way that makes sense. Tax is based on legal—rather than equitable—matters. How would one tax equity?Two polar opposites define the alternative approaches to the proper appraisal of income for purposes of taxation for transfer pricing. On the one hand, the United States Tax Court has focused largely on contractual language and terms of agreement. On the other, hand the OECD through BEPS jurisdictions (most of the rest of the world where policies have been formulated) choose to analyze actual economic behavior and reality independent of the mere words chosen by the parties.Globalization and technology have greater importance in our daily lives every day. As technology and industrial processes grow every day, technology leads to greater globalization, and greater globalization of supply chains leads to more efficient and efficient technology. For example, years ago, heart problems would lead to death, but now small “battery” type instruments (pacemakers) can prevent heart attacks. The examples of the health benefits from technology are endless.As technology becomes greater and more efficient, globalization has also created supply chains and industrial production processes that are no longer local. As global supply chains increase in complexity, profits need to be properly allocated to certain jurisdictions for taxation purposes—to raise revenue support government functions for society’s benefit. This is a fundamental issue of international taxation. The leading principle for the allocation is the arm’s length principle, according to which related enterprises must charge prices that would have been charged in the open market. Although the principle’s goal aims at avoiding profit shifting, multinational enterprises for years used to shift profits to low tax jurisdictions to avoid taxes in high tax jurisdictions. In the early part of the 21st century increased to attention to these phenomena has lead to the OECD’s Base Erosion and Profit Shifting (BEPS) project to combat this harmful tax competition. This is the most groundbreaking change to the international tax treaty framework since the 1920s—that was initially set up to facilitate cross-border trade. This BEPS project has led to fundamental proposals—as a type of model law—to change the international tax system.

scholarly journals The Role of Transfer-Pricing Schemes in Coordinated Supply Chains

2010 ◽  
Vol 25 (3) ◽  
pp. 375-404 ◽  
Author(s):  
Kashi R. Balachandran ◽  
Shu-hsing Li ◽  
Taychang Wang ◽  
Hsiao-wen Wang
Keyword(s):  
Supply Chains ◽  
Transfer Pricing ◽  
Pricing Schemes
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