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Can the integration of a tax compliant transfer pricing system into the management control system be Successful? Yes, it can!


Hummel, Katrin; Pfaff, Dieter; Bisig, Benedikt (2019). Can the integration of a tax compliant transfer pricing system into the management control system be Successful? Yes, it can! Journal of Accounting and Organizational Change, 15(2):198-230.

Abstract

Purpose – This paper draws on Adler and Borys’ (1996) concept of an enabling use of bureaucracy to examine how the integration of a single-book tax compliant transfer pricing system into the management control system is related to the perceived success of that transfer pricing system.
Design/methodology/approach – Based on survey data from Swiss multinational firms, the authors test a structural equation model. In addition, the authors conduct interviews with executives from three multinational enterprises.
Findings – The authors find that the integration of a tax compliant transfer pricing system into the management control system may be perceived to be successful in achieving both tax compliance and internal (control) purposes. This is particularly true when the transfer pricing system is transparent and can be amended in the case of fundamental management control problems.
Research limitations/implications – The typical shortcomings of survey-based research apply to this study. Future research could build on this model and more closely investigate the relationship between transfer pricing system integration and an enabling use of the transfer pricing system.
Practical implications – Based on this study’s findings, the authors recommend that a strong integration of tax compliant transfer prices into the management control system should be accompanied by internal transparency and the ability to repair the transfer pricing system.
Originality/value – Prior research on the integration of transfer pricing and management control systems has either been analytical or based on case studies. This cross-sectional analysis provides reliable insights into different levels of integration, use and success of transfer pricing systems.

Abstract

Purpose – This paper draws on Adler and Borys’ (1996) concept of an enabling use of bureaucracy to examine how the integration of a single-book tax compliant transfer pricing system into the management control system is related to the perceived success of that transfer pricing system.
Design/methodology/approach – Based on survey data from Swiss multinational firms, the authors test a structural equation model. In addition, the authors conduct interviews with executives from three multinational enterprises.
Findings – The authors find that the integration of a tax compliant transfer pricing system into the management control system may be perceived to be successful in achieving both tax compliance and internal (control) purposes. This is particularly true when the transfer pricing system is transparent and can be amended in the case of fundamental management control problems.
Research limitations/implications – The typical shortcomings of survey-based research apply to this study. Future research could build on this model and more closely investigate the relationship between transfer pricing system integration and an enabling use of the transfer pricing system.
Practical implications – Based on this study’s findings, the authors recommend that a strong integration of tax compliant transfer prices into the management control system should be accompanied by internal transparency and the ability to repair the transfer pricing system.
Originality/value – Prior research on the integration of transfer pricing and management control systems has either been analytical or based on case studies. This cross-sectional analysis provides reliable insights into different levels of integration, use and success of transfer pricing systems.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Accounting
Social Sciences & Humanities > Strategy and Management
Social Sciences & Humanities > Organizational Behavior and Human Resource Management
Language:English
Date:2019
Deposited On:20 Sep 2019 12:42
Last Modified:29 Jul 2020 11:21
Publisher:Emerald Publishing
ISSN:1832-5912
OA Status:Green
Publisher DOI:https://doi.org/10.2139/ssrn.2773512
Official URL:https://www.emerald.com/insight/content/doi/10.1108/JAOC-09-2017-0077/full/html
Other Identification Number:merlin-id:17366

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