Comment on Hiemann and Reichelstein: “Transfer Pricing in Multinational Corporations: An Integrated Management- and Tax Perspective”

Abstract

The role and impact of transfer prices have long been a subject of business administration research. As they are affecting both internal and external accounting, the management of such transfer prices between the diverging poles of taxation and economic targets is an aspect with growing prominence. The following comment is aimed to contribute to the important discussion on how, from a business administration perspective, a transfer price system should best be designed. As highlighted by Professor Reichelstein, such a system might be established on a “one set of books” or “two sets of books” principle. The idea of separating transfer price functions through the use of two sets of books specifically implies the introduction of differentiated transfer prices. The comment therefore discusses the perspective of decoupling transfer prices for managerial and taxation purposes. Overall, the evidence suggests that the specific management of transfer prices may contribute to solve major conflicts of interest within multinational corporations, but may lead to additional tax risks.