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Knocking on Tax Haven's Door: Multinational Firms and Transfer Pricing

Author

Listed:
  • Ronald Davies
  • Julien Martin
  • Mathieu Parenti
  • Farid Toubal

Abstract

This paper analyzes the transfer pricing of multinational firms. Intra-firm prices may systematically deviate from arm's length prices for two motives: pricing to market and tax avoidance. Using French firm-level data on arm's length and intra-firm export prices, we find that the sensitivity of intra-firm prices to foreign taxes is reinforced once we control for pricing-to-market determinants. Most importantly, we find no evidence of tax avoidance if we disregard tax haven destinations. Tax avoidance through transfer pricing is economically sizable. The bulk of this loss is driven by the exports of 450 firms to ten tax havens.

Suggested Citation

  • Ronald Davies & Julien Martin & Mathieu Parenti & Farid Toubal, 2018. "Knocking on Tax Haven's Door: Multinational Firms and Transfer Pricing," ULB Institutional Repository 2013/254377, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/254377
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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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