Decomposing the Margins of Transfer Pricing

Andrea Lassmann and Benedikt Zoller-Rydzek

No 19-450, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich

Abstract: This paper examines the determinants and margins of profit shifting through transferpricing. We develop a theory model, where transfer pricing patterns are governed by a generalized concealment cost function (CCF). Our empirical analysis draws on micro-level data about transaction-level imports, firm-level characteristics, as well as tax differentials between regions in Switzerland and countries abroad. We find, both theoretically and empirically, that more productive multinational firms deviate less from the arms’ length price and trade lower quantities, compared to MNEs with lower productivity. Moreover, the decision of firms to engage in transfer pricing depends negatively on a fixed cost component in the CCF, as well as trade costs. The model allows us to estimate a theory-consistent concealment cost function, which can be used for counterfactual analysis.

Keywords: Multinational firms; tax avoidance; tax havens; transferpricing (search for similar items in EconPapers)
JEL-codes: F23 H25 H26 H32 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2019-01
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.3929/ethz-b-000322881 (application/pdf)

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:kof:wpskof:19-450

Access Statistics for this paper

More papers in KOF Working papers from KOF Swiss Economic Institute, ETH Zurich Contact information at EDIRC.
Bibliographic data for series maintained by ().