Transfer Pricing: Alibi for Cross-Border Tax Evasion

Georgescu Iuliana Eugenia () and Afrãsinei Mihai-Bogdan ()
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Georgescu Iuliana Eugenia: Doctoral School of Economics, Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iaºi, Romania
Afrãsinei Mihai-Bogdan: Doctoral School of Economics, Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iaºi, Romania

Ovidius University Annals, Economic Sciences Series, 2013, vol. XIII, issue 1, 1258-1263

Abstract: In order to maximise profit and to reduce the burden of tax in the jurisdictions with high tax, many of the multinational companies abuse transfer pricing by directing the profit towards subsidiaries which are localised in more favourable jurisdictions from this point of view. The cross-border transactions effectuated, more exactly the mechanisms used to establish the transfer pricing involved in them, vary from the perfectly legal to the illegal ones and very often it is almost impossible for the tax authorities to contest them. The purpose of this paper is to analyse the mechanisms and practices of determining transfer pricing and their effects on the financial flows at the international level. The conclusions emphasize both the role played by transfer pricing in tax optimization and in cross-border tax evasion.

Keywords: transfer pricing; tax optimization; tax evasion; multinational companies (search for similar items in EconPapers)
JEL-codes: F23 H21 H26 M4 O16 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ovi:oviste:v:xii:y:2012:i:1:p:1258-1263

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