Intrafirm trade, taxation and transfer pricing: evidence from French data

Simon Quantin, S. Raspiller and S. Serravalle
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S. Raspiller: DGTPE
S. Serravalle: DGTPE

Documents de Travail de l'Insee - INSEE Working Papers from Institut National de la Statistique et des Etudes Economiques

Abstract: An important share of international exchanges take place within multinational firms, according to internal “transfer” prices. These prices can be influenced by cross-country differences in corporate taxation. A multinational group can reduce its global fiscal burden through overpricing of goods moving from low-tax to hight tax-countries. Several studies confirm such an influence, most of them on American data. This paper aims at providing insights about the French case, characterized by a relatively high level of corporate taxation. The empirical analysis is based on a survey which provides micro-data on the intra-firm trade of French affiliates of multinational firms and therefore enables to investigate to which extent international differences in company taxation influence the pricing of intra-firm transactions. Our main result indicates that a statutory corporate income tax rate in the foreign country one percentage point higher is associated with an (standardized) intra-firm trade balance relative to this country that is almost two percentage points higher.

Keywords: transfer pricing; corporate income tax; intra-firm trade; multinational firms (search for similar items in EconPapers)
JEL-codes: F23 H25 (search for similar items in EconPapers)
Date: 2009
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