Abstract: The relation between taxation states and foreign direct
investment has been studied for several perspectives and with states
of different levels of development. Usually it's only considered the
impact of tax level on the foreign direct investment volume. This
paper enhances this view by assuming that multinationals companies
(MNC) can use transfer prices systems and have got investment
timing flexibility. Thus, it evaluates the impact of the use of
international transfer pricing systems on the states- policy and on the
investment timing of the multinational companies. In uncertain
business environments (with periodical release of news), the
investment can increase if MNC detain investment delay options.
This paper shows how tax differentials can attract foreign direct
investments (FDI) and influence MNC behavior. The equilibrium is
set in a global environment where MNC can shift their profits
between states depending on the corporate tax rates. Assuming the
use of transfer pricing schemes, this paper confirms the relationship
between MNC behavior and the release of new business news.