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Tax-Motivated Transfer Pricing and Country-by-Country Reporting: Evidence from Japanese Customs Data

Author

Listed:
  • Makoto Hasegawa

    (Graduate School of Economics, Kyoto University)

  • Takafumi Kawakubo

    (Osaka School of International Public Policy, the University of Osaka)

  • Takafumi Suzuki

    (Faculty of Business, Aichi Shukutoku University)

  • Masayoshi Hayashi

    (Faculty of Economics, the University of Tokyo)

Abstract

Using Japanese firm-level customs data from 2014 to 2019, we investigate profit shifting through transfer pricing by Japanese multinational corporations. We find that Japanese firms reduce related-party export prices relative to arm's-length prices as the tax differentials between Japan and destination countries widen, indicating tax-motivated transfer pricing. The responsiveness of related-party prices to these taxdifferentials is, on average, smaller than that reported in previous studies but varies depending on transaction characteristics. Specifically, transfer mispricing is more pronounced in transactions involving larger parent-affiliate pairs and products that are exported less frequently. We also examine the impact of the country-by-country reporting (CbCR) system, introduced in Japan in 2016, and find no evidence that it reduced transfer mispricing by Japanese multinationals subject to CbCR.

Suggested Citation

  • Makoto Hasegawa & Takafumi Kawakubo & Takafumi Suzuki & Masayoshi Hayashi, 2026. "Tax-Motivated Transfer Pricing and Country-by-Country Reporting: Evidence from Japanese Customs Data," CIRJE F-Series CIRJE-F-1266, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2026cf1266
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