scholarly journals Experimental Evidence on Transfer Pricing

2016 ◽  
Vol 50 (1) ◽  
pp. 27-48 ◽  
Author(s):  
Quoc H. Tran ◽  
Rachel T. A. Croson ◽  
Barry J. Seldon
Keyword(s):  
Transfer Pricing ◽  
Tax Rates ◽  
Optimal Transfer ◽  
Policy Interventions ◽  
Economics Experiments ◽  
Theoretical Predictions ◽  
Transfer Prices ◽  
Partial Ownership ◽  
Tariff Rates ◽  
The Impact

Abstract We use incentivized economics experiments to test both the point predictions and comparative static predictions of optimal transfer pricing models, comparing behavior under varying conditions, including wholly versus partially-owned subsidiaries and different tariff and tax rates. As predicted, we find that transfer prices are responsive to relative tax and tariff rates as well as ownership proportions. Additionally, we examine convergence and learning in this setting. While individuals do not choose optimal transfer prices, their choices converge to optimal levels with experience. This paper thus makes two important contributions. First, by comparing behavior with theoretical predictions it provides evidence of whether (and when) individuals set transfer prices optimally. Second, by comparing behavior under conditions of full and partial ownership it provides evidence on the impact of policy interventions (like regulating ownership proportions by MNEs) on tax revenues.

scholarly journals Substitution across profit shifting methods and the impact on thin capitalization rules

2021 ◽  
Author(s):  
Gideon Goerdt ◽  
Wolfgang Eggert
Keyword(s):  
Multinational Firms ◽  
Transfer Pricing ◽  
Multinational Firm ◽  
Profit Shifting ◽  
Goods And Services ◽  
Internal Goods ◽  
Transfer Prices ◽  
Debt Shifting ◽  
The Impact ◽  
Thin Capitalization

AbstractThin capitalization rules limit firms’ ability to deduct internal interest payments from taxable income, thereby restricting debt shifting activities of multinational firms. Since multinational firms can limit their tax liability in several ways, regulation of debt shifting may have an impact on other profit shifting methods. We therefore provide a model in which a multinational firm can shift profits out of a host country by issuing internal debt from an entity located in a tax haven and by manipulating transfer prices on internal goods and services. The focus of this paper is the analysis of regulatory incentives, $$(i)$$ ( i ) if a multinational firm treats debt shifting and transfer pricing as substitutes or $$(ii)$$ ( i i ) if the methods are not directly connected. The results provide a new aspect for why hybrid thin capitalization rules are used. Our discussion in this paper explains why hybrid rules can result in improvements in welfare if multinational firms treat methods of profit shifting as substitutes.

scholarly journals Do Government Regulations Prevent Transfer Pricing Manipulations?

2011 ◽  
Vol 4 (10) ◽  
Author(s):  
Canri Chan
Keyword(s):  
Multinational Corporations ◽  
Transfer Pricing ◽  
Cash Flows ◽  
Transfer Price ◽  
Tax Rates ◽  
Performance Measurements ◽  
Government Regulations ◽  
Transfer Prices ◽  
Profit Performance ◽  
Efficient Allocations

This study investigated the effects of government regulations and incentives on the setting of transfer prices. I found significant main effects of both variables on transfer price choices. Transfer pricing is important, particularly for Multinational Corporations (MNCs), because of increased trends toward globalization of business activities and, simultaneously, decentralization. These trends have led to increased pressures for sound internal pricing systems, specifically transfer pricing, in order for organizations to ensure optimal and efficient allocations of organization resources and to provide profit performance measurements (Tang 1992). It has generally been recognized in the literature that in order to maximize after tax cash flows, MNCs shift profits from high to low tax jurisdictions. Governments in some countries, particularly those with high tax rates, are greatly concerned as to whether or not companies attempt to avoid tax liabilities via transfer pricing manipulation, specifically in terms of trying to shift profits to lower tax jurisdictions, and have enacted laws to limit transfer price choice.

scholarly journals TAX MORALITY: EXAMINING THE BEPS DEBATE, WORK OF THE OECD AND ITS IMPACT ON AFRICA

2017 ◽  
Author(s):  
Daniel Godson Olika
Keyword(s):  
Multinational Corporations ◽  
Transfer Pricing ◽  
Tax Rates ◽  
Profit Shifting ◽  
The Public ◽  
Pricing Rules ◽  
Planning Strategies ◽  
International Tax ◽  
Harsh Criticism ◽  
The Impact

International tax issues have never been at the forefront of international politics as they are today. This is due in large part to the realization that the current international tax system in existence allows multinational corporations to plan their taxes in such a way that they will be able to pay little or no taxes at all. They are able to do this through certain loopholes and gaps that currently exist in the system. These loopholes and gaps are seen as creating opportunities for taxpayers who are involved in cross-border activities to aggressively structure their activities to mitigate potential tax exposure or achieve no tax liabilities. They do this by exploiting; the hybrid-mismatch arrangements, shortcomings of the transfer pricing rules in jurisdictions where they operate and shifting profits from countries where their profits are made to countries with low tax rates. Consequently, some multinationals pay as little as five percent in corporate taxes, even as smaller domestic businesses pay up to 30 percent. The result of this activity is what is known as; base erosion and profit-shifting (BEPS) and it has the potential to deprive all countries of significant tax revenues. This rave debate and harsh criticism from the public influenced the intervention of the Organisation for Economic Co-operation and Development (OECD) to start its now famous BEPS Project. The OECD BEPS Project aims to provide governments or tax administrators with clear international solutions for fighting aggressive corporate tax planning strategies that artificially shift profits to locations where they are subjected to more favourable tax treatment. This paper shall address the various strands of the BEPS debate, the OECD BEPS project, the impact of the project in Africa and Nigeria. The next section shall address the various strands of the debate.

International Transfer Pricing and Tax Avoidance: Evidence from Linked Trade-Tax Statistics in the United Kingdom

2020 ◽  
Vol 102 (4) ◽  
pp. 766-778 ◽  
Author(s):  
Li Liu ◽  
Tim Schmidt-Eisenlohr ◽  
Dongxian Guo
Keyword(s):  
United Kingdom ◽  
Multinational Firms ◽  
Transfer Pricing ◽  
Tax Avoidance ◽  
Tax Rates ◽  
Corporate Tax ◽  
The United Kingdom ◽  
Tax Returns ◽  
Medium Level ◽  
Transfer Prices

This paper employs unique data on export transactions and corporate tax returns of UK multinational firms and finds that firms manipulate their transfer prices to shift profits to lower-taxed destinations. It shows that the 2009 tax reform in the United Kingdom, which changed the taxation of corporate profits from a worldwide to a territorial system, led to a substantial increase in transfer mispricing. It also provides evidence for a trade creation effect of transfer mispricing and estimates substantial transfer mispricing in non-tax-haven countries with low- to medium-level corporate tax rates, and in R&D intensive firms.

scholarly journals The influence of international offshore jurisdictions on the pricing strategy

VUZF Review ◽  
2021 ◽  
Vol 6 (4) ◽  
pp. 79-90
Author(s):  
Оlena Chukurna ◽  
Larysa Radkevych ◽  
Liliya Rudyk
Keyword(s):  
Transfer Pricing ◽  
Pricing Strategy ◽  
Pricing Mechanism ◽  
Pricing Process ◽  
Transfer Prices ◽  
National Economies ◽  
The Impact ◽  
The Relationship ◽  
A Company

The article analyzes the causes of offshore jurisdictions and identifies the effects of offshore on national economies. An analysis of the implementation of export-import operations carried out by offshore companies in order to influence the pricing process. The pricing mechanism with affiliates within offshore jurisdictions was presented. It was substantiated the role of offshore banks in the implementation of the pricing mechanism. It was presented the pricing mechanisms within offshore jurisdictions. It has been made an analysis of the impact of transfer pricing within offshore jurisdictions. It was substantiated the economic mechanism of pricing. The international experience of regulation of offshore jurisdictions and the system of controlling the operations of affiliates was analyzed. It was substantiated the mechanisms of functioning of offshore zones and companies operating in offshore jurisdictions. The relationship between agreements concluded within offshore jurisdictions in the following areas is established and substantiated: the agreement is concluded between two independent companies in case of underpricing; the agreement is concluded between the companies connected with the capital relations (affiliated companies) at understatement of the price; agreements between two independent companies in case of overpricing; agreements between affiliated companies in case of overpricing. It was justified the use of the transfer pricing mechanism within offshore jurisdictions. Transfer prices allow you to withdraw capital from the country, as well as hide the profits of companies from taxation. The following ways of minimizing taxation are systematized: registration of a company that concentrates profits in a jurisdiction with lower taxation; concentration of profits in companies that are unprofitable according to management accounting; the use of front companies as sales companies in which profits are concentrated; non-payment of taxes as a result of illegal liquidation of the enterprise - the taxpayer, where the profit is concentrated. The basis of tax minimization is the use in the transaction of a price that deviates from the market.

scholarly journals Pajak, Mekanisme Bonus dan Transfer Pricing

2019 ◽  
Vol 7 (1) ◽  
pp. 21
Author(s):  
Radhi Abdul Halim Rachmat
Keyword(s):  
Sampling Method ◽  
Stock Exchange ◽  
Transfer Pricing ◽  
Tax Avoidance ◽  
Tax Rates ◽  
Manufacturing Companies ◽  
Purposive Sampling ◽  
Analysis Technique ◽  
Research Population ◽  
The Impact

AbstractThe practice of transfer pricing is mostly carried out by multinational companies that want high profits through tax avoidance. in addition, bonus giving is also one of the motivations for obtaining high profits. This study aims to examine the effect of tax and bonus mechanisms on the company's decision to conduct transfer pricing. The research population used in this study were manufacturing companies listed on the IDX (Indonesia Stock Exchange) period 2013 - 2017 which amounted to 142 companies and research samples totaling 23 companies using purposive sampling method. The analysis technique used in this study used logistic regression analysis. The results of the research partially indicate that tax has a significant effect on transfer pricing and the bonus mechanism has a significant effect on transfer pricing. The impact of transfer pricing has the potential to harm state revenues in the taxation sector, because companies will divert their taxable profits to countries that have lower tax rates. AbstrakPraktik transfer pricing mayoritas dilakukan oleh perusahaan multinasional yang menginginkan laba tinggi melalui penghindaran pajak. selain itu, pemberian bonus juga merupakan salah satu motivasi untuk mendapatkan laba yang tinggi. Penelitian ini bertujuan untuk meneliti pengaruh pajak dan mekanisme bonus terhadap keputusan perusahaan untuk melakukan transfer pricing. Populasi penelitian yang digunakan dalam penelitian ini adalah perusahaan manufaktur yang terdaftar di BEI (Bursa Efek Indonesia) periode 2013 – 2017 yang berjumlah 142 perusahaan dan sampel penelitiam yang berjumlah 23 perusahaan dengan menggunakan metode purposive sampling. Teknik analisis yang digunakan pada penelitian ini menggunakan analisis regresi logistik. Hasil dari penelitian secara parsial menunjukkan bahwa pajak berpengaruh signifikan terhadap transfer pricing dan mekanisme bonus berpengaruh signifikan terhadap transfer pricing. Dampak transfer pricing berpotensi merugikan pendapatan negara pada sektor perpajakan, dikarenakan perusahaan akan mengalihkan laba kena pajaknya pada negara yang memiliki tarif pajak yang lebih rendahKata Kunci. pajak; mekanisme bonus; praktik transfer pricing

scholarly journals TRANSFER PRICES: PREREQUISITES FOR USE IN MANAGEMENT ACCOUNTING AND TAX ADMINISTRATION

2021 ◽  
Vol 2 (162) ◽  
pp. 71-77
Author(s):  
O. Vlasova
Keyword(s):  
Production Process ◽  
International Business ◽  
Negative Impact ◽  
Management Accounting ◽  
Transfer Pricing ◽  
Action Plan ◽  
Current Trend ◽  
Tax Administration ◽  
Transfer Prices ◽  
The Impact

Today, the issues of transfer pricing come to the fore in the ranking of current problems of tax administration not only in Ukraine but also in the world as a whole. This is due to the need for tax control to ensure price equality between related and independent entities in international business as a measure to combat the erosion of the tax base and the withdrawal of profits from taxation. The article presents a structured analysis of research by foreign and domestic scientists on transfer pricing in the field of management accounting or tax control. In particular, the grouping of views of scientists and practitioners on the nature and role in the accounting and analytical system of transfer pricing from the point of view of management accounting and tax administration. Study of the impact on the practice of transfer pricing methods of the picture of economic reality distorted by the negative impact of the COVID-19 pandemic. The need to use the transfer pricing mechanism in management accounting is due to the current trend of decentralization of management, and a prerequisite - the desire of top management to accelerate the production process, accelerate the turnover of equity and maximize profits. The advantages of using transfer pricing in management accounting to accelerate the production process and maximize profits, which led to the creation of corporations with the final technological cycle. It is also established that when deciding on the use of such a tool of internal pricing, one should keep in mind the cautions analyzed in the article. The preconditions for the introduction of tax control over transfer pricing in international business, as well as the basic laws and regulations in force in the global and Ukrainian economic space. The necessity and validity of the application of the OECD International Guidelines on Transfer Pricing, despite the provisions of Art. 39 of the Tax Code of Ukraine The ways of further development of tax control over transfer pricing within the framework of the BEPS Action Plan in Ukraine are considered. The need for further research on solving the problems of transfer pricing in the field of management accounting and taxation was identified, especially on the preparation of an information basis to justify the compliance of transfer prices with «Arm’s length principle».

scholarly journals MAXIMIZING PROFIT AFTER TAXATION BY EFECTS OF TRANSFER PRICES IN MULTINATIONAL COMPANIES

2014 ◽  
Vol 1 (9) ◽  
pp. 85
Author(s):  
Srđan Lalić ◽  
Brankica Dragičević
Keyword(s):  
Free Market ◽  
Transfer Pricing ◽  
Multinational Companies ◽  
The World ◽  
Transfer Prices ◽  
The Creation ◽  
International Tax ◽  
The Impact

About 70 % of today's world tradetakes place between related companies. Transactionsbetween them are called assignment or transfer, andthe prices at which the group of related companiesaccounted value of the purchase and sale of financialresults, are called transfer pricing. The main aim ofthis paper is to determine the impact that transferpricing has on the creation of international tax issues.Transfer prices between related parties maysubstantially differ from the prices created for thesame or similar transactions between unrelatedindividuals in a free market. Transfer prices are animportant tax issue which is characterized byincreasing complexity and level of commitment of taxauthorities around the world on this issue.

Analyzing Transfer Prices Impact at European Level on Romanian Companies

2020 ◽  
Vol 26 (2) ◽  
pp. 52-57
Author(s):  
Mihaela Paraschiva Luca ◽  
Cătălin Florin Zeti ◽  
Ioan Cosmin Pițu ◽  
Bianca Cristina Ciocănea
Keyword(s):  
Data Analysis ◽  
Scientific Literature ◽  
Transfer Pricing ◽  
Multinational Companies ◽  
European Level ◽  
Profit Shifting ◽  
Tax Base ◽  
Fiscal Reforms ◽  
Transfer Prices ◽  
The Impact

AbstractAt present, due to the current project of the Organization for Economic Cooperation and Development, with regard to tax base erosion and profit shifting (OECD BEPS), as well as with regard to the impact of global fiscal reforms in development, in transfer pricing, fiscal authorities are the ones in control in relationship with companies. Within this context, the present study presents and analyses the influences of the transfer pricing current environment at European level in the case of Romanian companies. Realizing a detailed and deep documentation of the existing scientific literature in this field and using a comparative data analysis lead to the conclusion that the diminishing in impact of these influences may be accomplished by the finding of new solutions by multinational companies through which they should manage accordingly the associated risk of transfer pricing and prevent the eventual misunderstandings with regard to fiscal authorities.

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