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Risk Estimation of Romanian Large Taxpayers Based on Transfer Pricing Analysis

Author

Listed:
  • George Bogdan STAN

    (The Bucharest University of Economic Studies)

  • Ioan Codruţ TURLEA

    (The Bucharest University of Economic Studies)

Abstract

The research on risk estimation probability in the area transfer pricing is a continuous challenge both for practitioners and for academics. By verifying the risk probability that an entity would have in the area of related party transactions, the management could make better financial decisions and adjustments in order to comply with the “free market” (independent and non-related party transactions). The present research analyzes the operating profit margins from 70 large taxpayers from Romania from 3 main markets: retail sale of automotive fuel in specialized stores, retail sale in non-specialized stores with food, beverages or tobacco predominating (supermarkets) and manufacture of electrical/ electronic equipment, other parts and accessories for motor vehicles; and compares them to operating profit margins of independent entities that have no direct affiliations with other companies. The analysis looks at the risk related to some financial performance indicators that an entity has, such return on total cost or return on sales to the same performance indicators of independent companies in the field the company belongs. The operating margins best suited for activity of the large taxpayers taken into consideration, will be compared with an interquartile range calculated from the operating margins obtained by independent entities in order to conclude the risk probability, revealing if that entity has an operating margin similar to the “free market”.

Suggested Citation

  • George Bogdan STAN & Ioan Codruţ TURLEA, 2017. "Risk Estimation of Romanian Large Taxpayers Based on Transfer Pricing Analysis," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 51(3), pages 281-298.
    • Handle: RePEc:cys:ecocyb:v:50:y:2017:i:3:p:281-298
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    References listed on IDEAS

    as
    1. Theresa Lohse & Nadine Riedel & Christoph Spengel, 2012. "The Increasing Importance of Transfer Pricing Regulations – a Worldwide Overview," Working Papers 1227, Oxford University Centre for Business Taxation.
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    More about this item

    Keywords

    transfer pricing; large taxpayers; risk probability; Romania; operating margins; interquartile range;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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