External publications

On the effects of transfer pricing regulations: a developing country perspective

Laudage Teles, Sabine / Nadine Riedel / Kristina Strohmaier
External Publications (2022)

in: Research School of International Taxation, Working Paper Series (RSIT-WP-08-2022)

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Multinational profit shifting by mis-pricing of intra-firm trade is a major concern for less developed countries (LDCs). Many have enacted transfer pricing rules in order to constrain this type of tax avoidance behavior.  Yet, not much is known on the rules' fiscal and economic effects. We offer a first empirical assessment, drawing on data for more than 120 low and middle income countries for a 30-year-period. Our results suggest that the introduction of transfer pricing regulations significantly increased corporate tax revenue collection in LDCs. The effect is fiscally sizable but fades out over time. We do not find indication for negative investment responses to the regulations.