Journal article
Multinational Enterprises, Tax Policy and R&D Expenses
Southern economic journal, Vol.57(1), pp.125-138
07/01/1990
DOI: 10.2307/1060483
Abstract
Recently, researchers have examined the effects of the US Treasury Department's rules concerning transfer pricing. In contrast to other research, here the focus is on the allocation of costs within a multinational firm, and the allocative efficiency effects of regulations dealing with research and development (R&D) expenses are examined via 3 approaches. With flexible cost allocations allowed, the price taking firm chose the allocatively efficient level of R&D input. The 2nd approach involved the arbitrary allocation of costs and how the firm's choice of R&D expenditure changed from when it had the freedom to allocate costs. Finally, the rules that Congress mandated are examined. The new tax law gives mixed incentives to over and under produce output in both markets. In addition, there are incentives for firms to over or under invest in R&D, depending on the percentage of sales within the US and the percentage of income derived from US sources. The new law does relatively nothing to help the firm invest in an allocatively efficient manner.
Details
- Title: Subtitle
- Multinational Enterprises, Tax Policy and R&D Expenses
- Creators
- Martin GraceSanford Berg
- Resource Type
- Journal article
- Publication Details
- Southern economic journal, Vol.57(1), pp.125-138
- Publisher
- Southern Economic Association; CHAPEL HILL
- DOI
- 10.2307/1060483
- ISSN
- 0038-4038
- eISSN
- 2325-8012
- Language
- English
- Date published
- 07/01/1990
- Academic Unit
- Finance
- Record Identifier
- 9984701250402771
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