Transfer pricing risks for a United States based multinational subject to the OECD guidelines and I.R.C. Section 482

This dissertation discusses the arm's length concept and provides a theoretical discussion and empirical evidence about potential problems and inconsistent provisions in the transfer pricing methods, processes, and procedures specified in the OECD Transfer Pricing Guidelines (OECD Guidelines) and the regulations under I.R.C. Section 482 that result in an increased relative risk of double taxation and/or penalties for a U.S. based multinational enterprise (MNE). This dissertation examines the question of whether or not the continuing use of the current U.S. rules on transfer pricing increases the risk of double tax and/or penalties for a U.S. based MNE by using transfer pricing methods and other rules that differ from the OECD Guidelines.; The research was designed to identify potential problems in implementing the arm's length concept. The 28 potential problems identified were separated into two categories: (1) the problems that apply to domestic related enterprises as well as MNES and are only more significant to an MNE to the extent that the MNE must deal with the same problem in two jurisdictions and (2) the problems that may cause an MNE to be at an increased risk that were utilized to identify five claims of contravention of the OECD stated goal of nondiscrimination. For purposes of this research, nondiscrimination has been limited, by definition, to the situation where an MNE has horizontal tax parity and is not at a disadvantage due to an increased risk of double taxation and/or penalties. The term double taxation is used in this dissertation to describe a situation where the same dollar of income is taxed by more than one revenue jurisdiction due to differences and ambiguities in transfer pricing rules, policies, and procedures.; The key findings in this dissertation are supported by a transfer pricing analysis conducted for a hypothetical company, a mathematical model, and the results of two empirical studies: a search for potential wholesaling comparables in the U.S. and Canada and a review of transfer pricing studies prepared by Ernst & Young LLP.