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Transfer pricing as a tax compliance risk

Listed author(s):
  • Sven P. Jost
  • Michael Pfaffermayr
  • Hannes Winner

This paper studies the role of transfer pricing as a critical compliance issue. Specifically, we analyse whether and to what extent the perceived risk associated with transfer pricing responds to country-, industry- and firm-specific characteristics. Empirically, 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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File URL: http://hdl.handle.net/10.1080/00014788.2014.883062
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Article provided by Taylor & Francis Journals in its journal Accounting and Business Research.

Volume (Year): 44 (2014)
Issue (Month): 3 (June)
Pages: 260-279

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Handle: RePEc:taf:acctbr:v:44:y:2014:i:3:p:260-279
DOI: 10.1080/00014788.2014.883062
Contact details of provider: Web page: http://www.tandfonline.com/RABR20

Order Information: Web: http://www.tandfonline.com/pricing/journal/RABR20

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  1. 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.
  2. Egger, Peter & Eggert, Wolfgang & Winner, Hannes, 2010. "Saving taxes through foreign plant ownership," Journal of International Economics, Elsevier, vol. 81(1), pages 99-108, May.
  3. Kant, Chander, 1990. "Multinational firms and government revenues," Journal of Public Economics, Elsevier, vol. 42(2), pages 135-147, July.
  4. Clausing, Kimberly A., 2009. "Multinational Firm Tax Avoidance and Tax Policy," National Tax Journal, National Tax Association, vol. 62(4), pages 703-725, December.
  5. Brian Erard & Jonathan S. Feinstein, 1994. "Honesty and Evasion in the Tax Compliance Game," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 1-19, Spring.
  6. 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 1059-1072, Sept.-Oct.
  7. 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.
  8. Elitzur, Ramy & Mintz, Jack, 1996. "Transfer pricing rules and corporate tax competition," Journal of Public Economics, Elsevier, vol. 60(3), pages 401-422, June.
  9. Michael P Devereux, 2007. "The Impact of Taxation on the Location of Capital, Firms and Profit: a Survey of Empirical Evidence," Working Papers 0702, Oxford University Centre for Business Taxation.
  10. P. B. Oyelere & C. R. Emmanuel, 1998. "International transfer pricing and income shifting: evidence from the UK," European Accounting Review, Taylor & Francis Journals, vol. 7(4), pages 623-635.
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