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At a Cost: The Real Effects of Transfer Pricing Regulations

Author

Listed:
  • Ruud Mooij

    () (International Monetary Fund)

  • Li Liu

    () (International Monetary Fund
    Oxford University Centre for Business Taxation)

Abstract

Unilateral adoption of transfer pricing regulations (TPRs) may have a negative impact on real investment by multinational corporations (MNCs). This paper uses a quasi-experimental research design, exploiting unique panel data on domestic and multinational companies in 27 countries during 2006–2014, to find that MNC affiliates reduce their investment by over 11% following the introduction of TPRs. There is no significant reduction in total investment by the MNC group, suggesting that these investments are most likely shifted to affiliates in other countries.

Suggested Citation

  • Ruud Mooij & Li Liu, 2020. "At a Cost: The Real Effects of Transfer Pricing Regulations," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 68(1), pages 268-306, March.
  • Handle: RePEc:pal:imfecr:v:68:y:2020:i:1:d:10.1057_s41308-019-00105-0
    DOI: 10.1057/s41308-019-00105-0
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    Cited by:

    1. Albertus, James F. & Glover, Brent & Levine, Oliver, 2019. "Heads I win, tails you lose: Asymmetric taxes, risk taking, and innovation," Journal of Monetary Economics, Elsevier, vol. 105(C), pages 24-40.

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    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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