Multinational Transfer Pricing Decision-making Research

Today, economic globalization is an important trend of economic development. The rapid development of transnational corporations is the main performance of economic globalization. Accompanied by the continuous development of transnational corporations, transnational corporations'internal transactions increase significantly. The issue of transfer pricing in transnational corporations'internal transactions are more and more concerned by the international societies. Transfer pricing is a kind of decision-making of transnational corporations'operating. Through the specific transfer pricing policies, transnational corporations can save transaction costs, and achieve the overall goal of profits maximization.This paper analyzes the motives of transfer pricing, which are generated from the internalization theory, the theory of separation of power and the theory of transfer of profits. It analyses the strengths and weaknesses of existing transfer pricing methods, and focus on the economic model of transfer pricing methods. Using the economic model, it analyzes the mechanism of transfer pricing from the centralized and decentralized mode. This paper also classifies the influence factors of transfer pricing based on the results of previous studies. It introduces a wide range of factors needed to be considered when transnational corporations decide transfer price, including the saving of transaction costs, the avoiding of risks, the reducing of taxation and the evaluating of subsidiaries'performance. Transfer pricing between countries will affect the distribution of tax, as well as transnational corporations will be facilitated in the international tax avoidance. In order to prevent the loss of tax, governments have paid great attention to the construction of tax system of transfer pricing. This paper introduces adjustment methods of transfer pricing in two aspects——adjustment methods of OECD and APA. It carried out a detailed comparison on the OECD transfer pricing guidelines and the transfer pricing taxation system of United States and other developed countries. This paper also introduces China's tax system of transfer pricing and focuses on China's adjustment method of transfer pricing. It suggests that the way to select methods of transfer pricing is based on the normal operation and management of transnational corporations, and tax avoidance is not the only purpose of transfer pricing. By analyzing the status of China's transnational corporations and the status of transfer pricing in China's transnational corporations, this paper suggests that we should learn from the advanced international practices, and then establish China's transnational corporations'transfer pricing system under the circumstance of China's national conditions.