Transfer Pricing as a Tax Compliance Risk
AbstractThis paper contributes to the empirical literature on the transfer pricing behavior of multinational firms. Previous research mainly focuses on transfer pricing as a means of tax optimization. Our approach concentrates on transfer pricing as a critical compliance issue. Specifically, we investigate whether and to what extent the awareness of transfer pricing as a tax compliance issue responds to country and industry characteristics as well as firm-specifics. Empirically, the transfer pricing risk awareness is measured as a professional assessment reported by the person with ultimate responsibility for transfer pricing in their company. Based on a unique global survey conducted by a Big 4 accounting firm in 2007 and 2008, we estimate the number of firms reporting transfer pricing being the largest risk issue with regard to subsequent tax payments. We find that transfer pricing risk awareness depends on variables accounting for general tax and transfer pricing specific strategies, the types and characteristics of intercompany transactions the multinational firms are involved in, their individual transfer pricing compliance efforts and resources dedicated to transfer pricing matters.
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Bibliographic InfoPaper provided by University of Salzburg in its series Working Papers in Economics and Finance with number 2010-6.
Length: 27 pages
Date of creation: 03 Feb 2010
Date of revision:
Transfer pricing; international taxation; multinational firms; tax risk management;
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
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-02-13 (Accounting & Auditing)
- NEP-ALL-2010-02-13 (All new papers)
- NEP-PBE-2010-02-13 (Public Economics)
- NEP-RMG-2010-02-13 (Risk Management)
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