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Transfer Pricing Risk Awareness of Multinational Corporations - Evidence from a Global Survey

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Sven P. Jost ()

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Abstract

This paper investigates the transfer pricing risk awareness of multinational firms using cross-sectional data of more than 350 firms located in 24 countries and classified in 12 industries. Moving beyond the sole tax optimization motives of multinational firms, we extend the existing literature by using unique firm-level information such as that the transfer pricing risk awareness is assessed and reported by the person ultimately responsible for transfer pricing. We find that the level of transfer pricing risk awareness of multinational companies predominantly depends on (i) the industry a firm operates in, (ii) a country's risk classification with respect to its transfer pricing regulations (e.g. penalty regimes in case of non-compliance with transfer pricing regulations), (iii) firm size and (iv) the interaction effect of the first two factors. By way of contrast, the time of introduction of transfer pricing regulations and also tax considerations do not seem to play a crucial role for transfer pricing risk perceptions.

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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2009-21.

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Length: 36
Date of creation: Sep 2009
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Handle: RePEc:inn:wpaper:2009-21

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Related research
Keywords: Transfer pricing; International taxation; Multinational firms; Tax risk management;

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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References listed on IDEAS
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  1. Kaplow, Louis, 1990. "Optimal taxation with costly enforcement and evasion," Journal of Public Economics, Elsevier, vol. 43(2), pages 221-236, November. [Downloadable!] (restricted)
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  2. Huizinga, Harry & Laeven, Luc, 2008. "International profit shifting within multinationals: A multi-country perspective," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1164-1182, June. [Downloadable!] (restricted)
  3. Elitzur, Ramy & Mintz, Jack, 1996. "Transfer pricing rules and corporate tax competition," Journal of Public Economics, Elsevier, vol. 60(3), pages 401-422, June. [Downloadable!] (restricted)
  4. Horst, Thomas, 1972. "Firm and Industry Determinants of the Decision to Invest Abroad: An Empirical Study," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 258-66, August. [Downloadable!] (restricted)
  5. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169. [Downloadable!] (restricted)
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  6. Clausing, Kimberly A., 2003. "Tax-motivated transfer pricing and US intrafirm trade prices," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2207-2223, September. [Downloadable!] (restricted)
  7. Conover, Teresa L. & Nichols, Nancy B., 2000. "A Further Examination of Income Shifting Through Transfer Pricing Considering Firm Size and/or Distress," The International Journal of Accounting, Elsevier, vol. 35(2), pages 189-211, 07. [Downloadable!] (restricted)
  8. Horst, Thomas, 1971. "The Theory of the Multinational Firm: Optimal Behavior under Different Tariff and Tax Rates," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1059-72, Sept.-Oct. [Downloadable!] (restricted)
  9. L. W. Copithorne, 1971. "International Corporate Transfer Prices and Government Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 4(3), pages 324-41, August. [Downloadable!] (restricted)
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