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Congruence of Competitive Advantage and Transfer Pricing: A Study on Selected MNCs Operating in Bangladesh

Md. Nur-E-Alam Siddique, Alim Al Ayub Ahmed

Abstract


For many years transfer pricing has been considered as an adherence issue whereby MNCs are lawfully required to arrange, document and file with tax revenue authorities. Moreover, most researchers have written on economics, accounting, taxation and finance aspect of transfer pricing. But, later, transfer pricing has been recognized as a strategic tool that can facilitate MNCs to achieve competitive advantage. Furthermore, there are few literatures on transfer pricing and strategy. The research question of the study was to find out how MNCs operating in Bangladesh are applying transfer pricing as a strategic tool. The study adopted descriptive research design which enabled to describe characteristics connected with the subject population. It was found out that transfer pricing was practiced to achieve internal objectives such as motivating subsidiary managers, monitoring performance of foreign subsidiaries and as a way of achieving goal synchronization between subsidiary managers and parent companies. External objectives incorporated practice of transfer pricing as a means of reducing taxes and duties as a tool of controlling foreign exchange risks, as a cash management means and as a way of evasion of foreign government interfering. It was discovered that in contrast to a purely accounting, economics and tax driven systems, transfer pricing is viewed as a tool for advancing MNCs strategies in Bangladesh. Findings pointed out that executives were not exclusively focused on compliance, accounting, economics and taxation issues as primary objectives of transfer pricing.   

 


Keywords


Transfer Pricing, MNC, Taxation, Strategy, Competitive advantage, Bangladesh

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