International Transfer Pricing and Tax Avoidance: Evidence from Linked Trade-Tax Statistics in the UK

Dongxian Guo, Li Liu and Tim Schmidt-Eisenlohr

No 1214, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper employs unique data on export transactions and corporate tax returns of UK multinational firms and finds that firms manipulate their transfer prices to shift profits to lower-taxed destinations. It uncovers three new findings on tax-motivated transfer mispricing in real goods. First, transfer mispricing increases substantially when taxation of foreign profits changes from a worldwide to a territorial approach in the UK, with multinationals shifting more profits into low-tax jurisdictions. Second, transfer mispricing increases with a firm's R&D intensity. Third, tax-motivated transfer mispricing is concentrated in countries that are not tax havens and have low-to-medium-level corporate tax rates.

Keywords: Transfer pricing; Corporate taxation avoidance; Multinational firms (search for similar items in EconPapers)
JEL-codes: F23 H25 H32 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2017-10-04
New Economics Papers: this item is included in nep-eur, nep-int, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: International Transfer Pricing and Tax Avoidance: Evidence from Linked Trade-Tax Statistics in the UK (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1214

DOI: 10.17016/IFDP.2017.1214

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