Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
International Transfer Pricing and Tax Avoidance : Evidence from Linked Trade-Tax Statistics in the UK
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.
Cite this item
Li Liu & Tim Schmidt-Eisenlohr & Dongxian Guo, International Transfer Pricing and Tax Avoidance : Evidence from Linked Trade-Tax Statistics in the UK, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 1214, 04 Oct 2017.
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
Keywords: Transfer pricing ; Corporate taxation avoidance ; Multinational firms
This item with handle RePEc:fip:fedgif:1214
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