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MINIMIZING RISK OF TRANSFER PRICING AUDIT AND AWAKENING THE GIANT OF CORPORATE STEWARDSHIP: AN ETHICAL DECISION MAKING MODEL (EDMM) FOR MULTINATIONAL ENTERPRISE (MNE) TRANSFER PRICING

ABSTRACT

This manuscript presents an ethical decision making model (EDMM) for transfer pricing (TP). The EDMM has been theoretically and empirically supported in the strategic management, marketing, and ethics literatures, but never applied in a TP context. The model is embedded into the realities and risks presented in TP literature to reveal shortcomings in the ethical reasoning styles of multinational enterprise (MNE) managers. One shortcoming reveals that TP programs have been managed with an overly dominant focus on cost/benefit-based reasoning (ideological), which seeks to minimize effective global tax rates and/or to avoid or effectively manage the risk of tax audits. Another ...

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