Tax Consequences of Mispricing Unrelated-Party Transactions

Peter R. Merrill

National Tax Journal, 2026, vol. 79, issue 3, 721 - 732

Abstract: Tax-motivated mispricing in related-party transactions has been extensively studied, especially concerning income shifting to low-tax jurisdictions by multinational corporations. However, mispricing between unrelated parties — such as barter, implicit financial fees, and donations to tax-exempt entities — has received less attention from scholars and tax administrators. Unrelated-party mispricing is estimated to have a greater revenue cost than related-party transfer pricing and is found to have generally regressive distributional consequences. Potential policy interventions are discussed to address these issues.

Date: 2026
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