Risk Estimation of Romanian Large Taxpayers Based on Transfer Pricing Analysis

George Bogdan Stan and Ioan Codruţ Turlea
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George Bogdan Stan: The Bucharest University of Economic Studies
Ioan Codruţ Turlea: The Bucharest University of Economic Studies

ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, 2017, vol. 51, issue 3, 281-298

Abstract: The research on risk estimation probability in the area transfer pricing is a continuous challenge both for practitioners and for academics. By verifying the risk probability that an entity would have in the area of related party transactions, the management could make better financial decisions and adjustments in order to comply with the “free market” (independent and non-related party transactions). The present research analyzes the operating profit margins from 70 large taxpayers from Romania from 3 main markets: retail sale of automotive fuel in specialized stores, retail sale in non-specialized stores with food, beverages or tobacco predominating (supermarkets) and manufacture of electrical/ electronic equipment, other parts and accessories for motor vehicles; and compares them to operating profit margins of independent entities that have no direct affiliations with other companies. The analysis looks at the risk related to some financial performance indicators that an entity has, such return on total cost or return on sales to the same performance indicators of independent companies in the field the company belongs. The operating margins best suited for activity of the large taxpayers taken into consideration, will be compared with an interquartile range calculated from the operating margins obtained by independent entities in order to conclude the risk probability, revealing if that entity has an operating margin similar to the “free market”.

Keywords: transfer pricing; large taxpayers; risk probability; Romania; operating margins; interquartile range (search for similar items in EconPapers)
JEL-codes: C10 C13 C46 G10 G32 H20 (search for similar items in EconPapers)
Date: 2017
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