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Transfer Pricing Risk Awareness of Multinational Corporations - Evidence from a Global Survey

  • Sven P. Jost

    ()

This paper investigates the transfer pricing risk awareness of multinational firms using cross-sectional data of more than 350 firms located in 24 countries and classified in 12 industries. Moving beyond the sole tax optimization motives of multinational firms, we extend the existing literature by using unique firm-level information such as that the transfer pricing risk awareness is assessed and reported by the person ultimately responsible for transfer pricing. We find that the level of transfer pricing risk awareness of multinational companies predominantly depends on (i) the industry a firm operates in, (ii) a country's risk classification with respect to its transfer pricing regulations (e.g. penalty regimes in case of non-compliance with transfer pricing regulations), (iii) firm size and (iv) the interaction effect of the first two factors. By way of contrast, the time of introduction of transfer pricing regulations and also tax considerations do not seem to play a crucial role for transfer pricing risk perceptions.

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File URL: http://eeecon.uibk.ac.at/wopec2/repec/inn/wpaper/2009-21.pdf
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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2009-21.

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Length: 36
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:inn:wpaper:2009-21
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  1. Elitzur, Ramy & Mintz, Jack, 1996. "Transfer pricing rules and corporate tax competition," Journal of Public Economics, Elsevier, vol. 60(3), pages 401-422, June.
  2. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
  3. Grubert, Harry & Mutti, John, 1991. "Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 285-93, May.
  4. 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.
  5. 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 1059-72, Sept.-Oct.
  6. L. W. Copithorne, 1971. "International Corporate Transfer Prices and Government Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 4(3), pages 324-41, August.
  7. Mohammad F Al-Eryani & Pervaiz Alam & Syed H Akhter, 1990. "Transfer Pricing Determinants of U.S. Multinationals," Journal of International Business Studies, Palgrave Macmillan, vol. 21(3), pages 409-425, September.
  8. Horst, Thomas, 1972. "Firm and Industry Determinants of the Decision to Invest Abroad: An Empirical Study," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 258-66, August.
  9. Kaplow, Louis, 1990. "Optimal taxation with costly enforcement and evasion," Journal of Public Economics, Elsevier, vol. 43(2), pages 221-236, November.
  10. Harry Huizinga & Luc Laeven, 2006. "International profit shifting within multinationals: a multi-country perspective," European Economy - Economic Papers 260, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  11. Conover, Teresa L. & Nichols, Nancy B., 2000. "A Further Examination of Income Shifting Through Transfer Pricing Considering Firm Size and/or Distress," The International Journal of Accounting, Elsevier, vol. 35(2), pages 189-211, 07.
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