This paper addresses how overhead cost allocation system design in multinational enterprises
(MNEs) is affected by transfer pricing tax regulation. Using a case study research
strategy we find that the implementation of a transfer pricing tax compliance strategy
gives rise to a number of changes to the overhead cost allocation system design. Findings
suggests that a contingent relationship exists between overhead cost allocation and transfer
pricing tax compliance. We argue that when seeking to understand and explain MNEs’
overhead cost allocation system design for intra-company services, the MNEs’ response to
its tax regulatory environment is a significant explanatory variable