European Financial and Accounting Journal 2009, 4(2):65-78 | DOI: 10.18267/j.efaj.67

Detection of Possible Tax-Evasive Transfer Pricing in Multinational Enterprises

Jaroslav Brada1, Tomáš Buus2
1 Doc. Ing. Jaroslav Brada, Ph.D. - associate professor; Department of Monetary Theory and Policy, Faculty of Finance and Accounting, University of Economics, Prague, W. Churchill sq. 4, 130 67 Prague, Czech Republic; .
2 Ing. Tomáš Buus, Ph.D. - assistant professor; Department of Corporate Finance and Valuation, Faculty of Finance and Accounting, University of Economics, Prague, W. Churchill sq. 4, 130 67 Prague, Czech Republic; .

In this paper we analyze possible source of tax evasion in the multinational entity (hereinafter "MNE"). We show that the tax obligation of the whole MNE depends on the ownership structure of companies, which form MNE and that the structure could be described by matrix form. Therefore the basic tax optimization tasks of MNE via transfer pricing can be understood as linear programming problems. In addition we propose a way to identify possible tax evasion realized via transfer pricing in MNE.

Keywords: Linear programming, Mathematical taxation, Multinational entities, Tax authorities, Tax evasion, Transfer prices
JEL classification: D21, D29, G39

Published: June 1, 2009  Show citation

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Brada, J., & Buus, T. (2009). Detection of Possible Tax-Evasive Transfer Pricing in Multinational Enterprises. European Financial and Accounting Journal4(2), 65-78. doi: 10.18267/j.efaj.67
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