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International Transfer Pricing and Tax Avoidance: Evidence from Linked Trade-Tax Statistics in the United Kingdom


  • Li Liu

    (International Monetary Fund)

  • Tim Schmidt-Eisenlohr

    (Federal Reserve Board of Governors)

  • Dongxian Guo

    (University College London)


This paper employs unique data on export transactions and corporate tax returns of UK multinational firms and finds that firms manipulate their transfer prices to shift profits to lower-taxed destinations. It shows that the 2009 tax reform in the United Kingdom, which changed the taxation of corporate profits from a worldwide to a territorial system, led to a substantial increase in transfer mispricing. It also provides evidence for a trade creation effect of transfer mispricing and estimates substantial transfer mispricing in non-tax-haven countries with low- to medium-level corporate tax rates, and in R&D intensive firms.

Suggested Citation

  • Li Liu & Tim Schmidt-Eisenlohr & Dongxian Guo, 2020. "International Transfer Pricing and Tax Avoidance: Evidence from Linked Trade-Tax Statistics in the United Kingdom," The Review of Economics and Statistics, MIT Press, vol. 102(4), pages 766-778, October.
  • Handle: RePEc:tpr:restat:v:102:y:2020:i:4:p:766-778

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    Cited by:

    1. Makoto HASEGAWA & Michi KAKEBAYASHI, 2020. "The Effect of Foreign Dividend Exemption on Profit Repatriation through Dividends, Royalties, and Interest: Evidence from Japan," Discussion papers e-20-004, Graduate School of Economics , Kyoto University.

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