The Analysis of Taiwan's Transfer Pricing System—From the Viewpoint of Game Theory

• Main Authors: May Ling Liu, 劉美玲
• Other Authors: Yu Ming Ho
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/60686960843804162062

碩士 === 國立高雄應用科技大學 === 商務經營研究所 === 98 === Multinational enterprises manage to minimize the cost and maximize the compatibility by means of international stratagem during globalization. In particular, it is supposed that transfer pricing of intra-firm trade constitutes a workable channel for enterprises to re-distribute their profits among countries. However, reducing taxable profits had caused to huge taxation losses, which had led to the raise of transfer pricing regulation in many countries and they have been increasingly engaging in transfer pricing audit and investigation. In order to follow the global trend, Taiwanese government had established the regulation, Regulations Governing of Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm’s-Length Transfer Pricing, in the end of 2004. Base on this regulation to build up fairness system, to maintain the taxation justice and secure country’s taxes income is expected. This study is based on the Game Theory model, by using of cooperative game and non-cooperative game to investigate whether the Taiwan’s present transfer pricing police can prevent any impropriate profit relocation within multinational enterprises, in order to reduce taxation losses and increase social welfare. According to the analysis result in this study, the rate of tax evasion increases as the cost of government auditing increases. However, if government gives heavier punishment or increases the auditing rate, the tax evasion will decrease. The auditing program in present transfer pricing system is restrained by the data of controlled transaction acquirement. It did increase the auditing cost. Since the auditing rate is low and the punishment is so weak, then the tax evasion is encouraged. By the way, the APAs program in transfer pricing system could be the key to resolve the problem on the data of controlled transaction acquirement, to benefit both of government and enterprises and also to positive the Pareto efficiency. From this study , we advise the following suggestions to the government to revise the law and address the transfer pricing system： 1.Recruit economists into APAs team. 2.Enlarge the qualification for APAs application. 3.To add punishment terms in APAs. 4.To define the provided data for APAs is only using on APAs auditing. 5.Sign up the agreement with China to share taxation information. 6.Set up trading database for Arm’s-Length transaction.