LOCATION SAVINGS ADJUSTMENT TO PROFITS

Ednaldo Silva, RoyaltyStat®, Bethesda, Maryland, U.S.A.

Published in

JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS
Volume 19, Issue 1, p29-34, March 2019

ABSTRACT

MNE income taxes in developing countries are determined by profit rates from enterprise-level comparables in developed countries. Unless a location saving adjustment is made, corporate income taxes collected in developing countries are under-reported because wage and salary shares (unit labor costs) don’‘t converge. We develop a simple formula to correct this systemic error that, if left uncorrected, adds to the persistent poverty of most of the world’‘s population.

Keywords

Transfer Pricing, Location Savings, Disparity of Profit Rates.


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