Title: How transfer prices can affect a supply chain strategic decision

Authors: Ralph Drtina, Henrique L. Correa

Addresses: Crummer Graduate School of Business, Rollins College, 1000 Holt Avenue – 2722, Winter Park, Florida 32789-4499, USA. ' Crummer Graduate School of Business, Rollins College, 1000 Holt Avenue – 2722, Winter Park, Florida 32789-4499, USA

Abstract: One of the most important decisions in global supply chain management is whether to outsource or in-source production. This decision is made by reference to a set of quantitative and qualitative models. However, one factor has frequently been overlooked: the tax consequences that result from multi-national company transfer prices. The purpose of this paper is to fill the void by: 1) explaining how transfer prices affect tax obligations; 2) discussing the arm|s length standard that governs global transfer pricing; 3) demonstrating how global tax differentials can affect the offshoring decision. We conclude with suggestions for future research.

Keywords: outsourcing; offshoring; transfer prices; supply chain management; SCM; strategic decisions; global supply chains; globalisation; in-sourcing; quantitative models; qualitative models; tax consequences; taxation; multinational corporations; MNCs; tax obligations; arm|s length standards; transfer pricing; tax differentials; logistics systems; logistics management.

DOI: 10.1504/IJLSM.2011.039595

International Journal of Logistics Systems and Management, 2011 Vol.8 No.4, pp.363 - 376

Published online: 06 May 2015 *

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