International Transfer Pricing and Tax Avoidance : Evidence from Linked Trade-Tax Statistics in the UK
Abstract: 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 uncovers three new findings on tax-motivated transfer mispricing in real goods. First, transfer mispricing increases substantially when taxation of foreign profits changes from a worldwide to a territorial approach in the UK, with multinationals shifting more profits into low-tax jurisdictions. Second, transfer mispricing increases with a firm's R&D intensity. Third, tax-motivated transfer mispricing is concentrated in countries that are not tax havens and have low-to-medium-level corporate tax rates.
File(s): File format is application/pdf https://www.federalreserve.gov/econres/ifdp/files/ifdp1214.pdf
Part of Series: International Finance Discussion Papers
Publication Date: 2017-10-04
Pages: 39 pages