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This paper aims to study the management of international transfer pricing (ITP) tax risks in multinational enterprises (MNEs). Specifically, the authors examine how in-house tax departments interact with business managers to implement tax strategies for ITP.

This paper is based on the case study method. The main empirical data consists of interviews with in-house accounting and tax professionals. The authors use social network theory and the notion of coercive versus enabling management styles as a lens for explaining the dynamic between centralized tax departments and local business managers.

The authors find that tax departments are not merely technocratic silos that mechanically administer and enforce the organizational implementation of ITP policies. Rather, tax departments are actively working to market themselves as enabling business partners to local business managers by using deliberate schemes of relationship building to accomplish tax strategy objectives.

Corporate taxes are a vital component for financing critical infrastructure, such as hospitals, schools, roads, bridges, water and electric systems. The work contributes to a contemporary discussion on MNEs’ tax strategies, including how they organize tax risk management processes for ITP.

Accounting research has mainly focused on the technical and regulatory details of ITP while ignoring the interpersonal aspects of tax risk management in MNEs. The authors argue that today’s tax department professionals must possess not only technical expertise but also interpersonal skills. Such skills are critical for building intraorganizational relationships with business managers to facilitate the bottom–up information flows needed to manage ITP tax risks.