Managerial autonomy and tax compliance : an empirical study on international transfer pricing

Koon Hung CHAN, Wai Yee, Agnes LO, Lai Lan, Phyllis MO

Research output: Journal PublicationsJournal Article (refereed)peer-review


This paper examines the impact of managerial autonomy on tax compliance in an international transfer pricing context. Specifically, we study whether foreign subsidiaries' autonomy in making pricing and sourcing decisions on intrafirm transfers affect their profit shifting through international transfer pricing. We measure transfer pricing noncompliance in terms of tax audit adjustments made by tax authorities. Based on a sample of 163 transfer pricing audits on foreign investment enterprises (FIEs) in China, we find that tax audit adjustments for FIEs that have autonomy in setting transfer prices or sourcing from outsiders are smaller than those that have their transfer transactions dictated by parent companies.
Original languageEnglish
Pages (from-to)1-22
Number of pages22
JournalJournal of the American Taxation Association
Issue number2
Publication statusPublished - 1 Jan 2006

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