At A Cost: the Real Effects of Transfer Pricing Regulations
IMF Working Papers, March 23, 2018
Source details
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- At A Cost: the Real Effects of Transfer Pricing Regulations
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Bibliographic details
- Authors: Ruud A. de Mooij, Li Liu
- Published: March 23, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484347539.001
Overview
- Unilateral adoption of transfer pricing regulations may have a negative impact on real investment by multinational corporations (MNCs).
- The paper uses a quasi-experimental research design exploiting unique panel data on domestic and multinational companies in 27 countries during 2006-2014.
Key findings
- MNC affiliates reduce their investment by over 11 percent following the introduction of transfer pricing regulations.
- There is no significant reduction in total investment by the MNC group, suggesting that these investments are most likely shifted to affiliates in other countries.
- The impact of transfer pricing regulations corresponds to an increase in the "TPR-adjusted" corporate tax rate by almost one quarter.
Methodology highlights
- Research design: quasi-experimental.
- Data: unique panel data on domestic and multinational companies in 27 countries during 2006-2014.
Policy implications and considerations
- Unilateral implementation of transfer pricing regulations can lead to reductions in affiliate-level investment without reducing overall MNC group investment, indicating relocation of investment across borders.
- Policymakers should weigh the potential for investment shifting when considering unilateral transfer pricing regulations, as the effective "TPR-adjusted" corporate tax burden rises by almost one quarter for affected affiliates.
Source: At A Cost: the Real Effects of Transfer Pricing Regulations, Ruud A. de Mooij and Li Liu, IMF Working Papers 2018, 069 (March 23, 2018).
Content in this bundle
- At a Cost: The Real Effects of Transfer Pricing Regulations, WP/18/69, March 2018