Transfer (mis)pricing of multinational enterprises: evidence from Finland

Marika Viertola

No 162, Working Papers from VATT Institute for Economic Research

Abstract: This paper studies how firms manipulate their transfer prices to shift profit from high tax countries to low tax countries. Using detailed transactiondestination level firm data for years 2013-2019, I find evidence of Finnish multinational enterprises underpricing their exports to low tax destinations. By exploiting variation in corporate income tax rate differences and differences in the ownership of affiliates, I apply a triple difference estimation strategy. I find that a 1 percentage point increase in tax rate difference decreases export unit value by 1.2% among multinational firms exporting to low tax countries. My results suggest firms use transfer pricing as a complement channel, as firms more prone to other profit shifting mechanisms also underprice their exports more. Also, I provide evidence that transfer mispricing is concentrated in exports destined to countries where the multinational’s affiliate has a higher level of economic activity. Where the results with exports are very robust, the results with imports are mixed, suggesting an asymmetrical pattern in transfer pricing.

Keywords: multinational firms; international corporate taxation; tax avoidance; profit shifting; Business taxation and regulation; F23; H25; H26; fi=Verotus|sv=Beskattning|en=Taxation| (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-acc, nep-int and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.doria.fi/handle/10024/188438

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fer:wpaper:162

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from VATT Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Anita Niskanen ().