Order Timing Decision In A Supply Chain Considering Tax Incentives And Cross-Border Planning

In recent years,many foreign countries,including Vietnam and Indonesia,are attracting foreign investment by offering preferential tax policies.Being aware of the benefits,multinational firms(MNFs)can allocate the gross profits to these countries by opening retailing divisions,thereby realizing the benefits of tax planning.However,this may lead to the competition with the existing local partners,which in turn affects the motivation of MNFs to open retailing divisions.First,we consider a co-opetitive supply chain consisting of a MNF(parent company+retailing division)and a local cooperative retailer after the establishment of the retailing division.The local cooperative retailer purchases products from the MNF for resale.The transfer pricing between the manufacturing and retailing division is constrained by Arm's Length Regulation(ALR).Meanwhile,when the retailing division is successfully established,the MNF can decide whether to delegate decision-making power to the retailing division,thus forming a centralized and decentralized channel structure.We focus on how the MNF breaks the restrictions of ALR through the order timing weapon,and maximize the benefits of cross-border tax planning while maintaining the sales revenue from the local retailer Interestingly,we reveal that,under the centralized structure,the MNF's pricing weapon is more efficient than the order size weapon in coordinating total supply chain revenue.Under the decentralized structure,the flexibility of the MNF to adjust revenue source is constrained,the MNF can only obtain more profits through tax planning channel,and both parties tend to seize the first-mover advantageSecond,based on the previously mentioned co-opetitive supply chain,we further consider opening a retailing division costly.The results show that under the centralized structure,the opening motivation of the MNF is affected by tax rate difference.When the tax rate difference is small,the establishment of the retailing division may benefit the local cooperative retailer,but the high cost hurts the MNF's profits from tax planning channel.In contrast,under the decentralized structure,because the opening cost is high and the flexibility of adjusting revenue source is restricted,any party ordering early may hurt the MNF' profits in the wholesale channel/tax planning channel.After the establishment of the retailing division,the relationship with the original local retailer may also be broken.The local retailer finds a new overseas supplier and form a"chain-to-chain" competitive structure with the MNF(parent company+retailing division).Therefore,finally,we analyze this chain-to-chain competition structure.We find that,when the MNF can only make profits through tax planning channel,the MNF cares more about the distribution of profits between the two divisions.Whether in a centralized or decentralized structure,the first mover advantage may damage the MNF'profits.This paper creatively incorporates the tax planning and the order timing decision of MNFs.The results have great significance for MNFs and local cooperative retailers to carry out green and scientific supply chain decisions.