The transfer pricing concerns of developed and developing countries

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Are concerns about transfer pricing, income shifting, and inequitable tax allocations exaggerated in recent accounting and tax literature? A survey of 47 countries provides evidence that transfer pricing issues are of genuine and increasing concern to the governments of both developed and developing countries. One recommendation to curtail transfer pricing manipulations is to develop standardized transfer pricing policy and procedures to be implemented globally. A second suggestion is to mandate increased disclosures about the magnitude and effects of transfer pricing on subsidiary income and tax liabilities in the financial reports of transnational corporations engaging in cross-border transactions. However, as long as some countries continue to operate as tax havens, income shifting by TNCs is tacitly encouraged and will continue unabated. Concurrent with globally acceptable standards must be the gradual elimination of tax rate differentials that contribute to income shifting and the inevitable misallocation of tax revenues.






This article is the authors' final published version in The International Journal of Accounting, Volume 32, Issue 3, 1997, Pages 321-336.

The published version is available at https://doi.org/10.1016/S0020-7063(97)90014-5. Copyright © Elsevier Inc.