Tax-motivated transfer pricing and US intrafirm trade prices

Clausing, Kimberly A.

doi:10.1016/s0047-2727(02)00015-4

Cited by 419 publications

(315 citation statements)

References 10 publications

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“…Weichenrieder (2009) uses con dential data on German inbound and 1 While there is an increasingly large number of international studies on debt shifting, the literature providing direct evidence for transfer pricing is typically based on con dential US data. Examples include Swenson (2001) using US Department of Census trade data, Clausing (2003) using Bureau of Labour Statistics data and Bernard et al (2006) using the Linked/Longitudinal Firm Trade Transactions Database.…”

Section: Introductionmentioning

confidence: 99%

“…More generally, costs of pro t shifting may be resource costs, such as hiring tax and transfer price experts to allocate e ciently accounting pro ts, or they can represent costs that the rm pays only if they are caught by the tax authorities. A consequence of this functional form is that the bigger the operation of an MNE in country 1, the cheaper it is to shift a given level of pro ts between the 3 See De Ederveen (2008 and2003) for a comprehensive overview of the empirical literature. 4 The theoretical model in this paper, and the general idea of this paper, builds on Chapter 3 from Mokkas (2009).…”

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confidence: 99%

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Evidence for Profit Shifting with Tax-sensitive Capital Stocks

Mokkas¹

2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper contributes to the literature providing indirect evidence for pro t shifting within multinational companies. In contrast to the previous studies we account for the tax responsiveness of the capital stock and analyse the impact of corporate taxes on both pre-and post-tax pro tability. Evidence from our large panel dataset of European subsidiaries supports the pro t shifting hypothesis. We nd that a 10 percentage point decrease in the tax rate increases post-tax pro tability by up to 1.1 percentage points. Further, our results suggest that nancial pro ts and losses are particularly responsive to taxes, which indicates that a large part of pro t shifting takes places via debt shifting. JEL classi cation: H25, H87 Terms of use: Documents in EconStor may

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Section: Introductionmentioning

confidence: 99%

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confidence: 99%

Evidence for Profit Shifting with Tax-sensitive Capital Stocks

Mokkas¹

2015

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“…Academic studies have used trade data, ideally at the transaction level (Clausing, 2003;de Boyrie et al, 2005aand 2005b, Pak, 2007Zdanowicz, 2009), and there is broad support for seeing tax as a motivation for intra-firm pricing decisions and for the scale of trade mispricing as a channel of illicit flows. Similar methods were applied by Christian Aid (McNair et al 2009), which confirmed the reasonableness of the $160 billion estimate for revenue losses from trade mispricing while providing much greater detail about the highest-risk areas.…”

Section: Trade Mispricing Approachesmentioning

confidence: 99%

Estimating Illicit Flows of Capital via Trade Mispricing: A Forensic Analysis of Data on Switzerland

Cobham,

Jansky,

Prats

2014

SSRN Journal

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This paper assesses the role of Switzerland, as the leading hub for global commodities trading, in terms of the patterns of prices received by original exporting countries and subsequently by Switzerland and other jurisdictions. We find support for the hypotheses that (i) the average prices for commodity exports from developing countries to Switzerland are lower than those to other jurisdictions; and that (ii) Switzerland declares higher (re-)export prices for those commodities than do other jurisdictions. This pattern implies a potential capital loss for commodity exporting developing countries, and we provide a range of estimates of that loss -each of which suggests the scale is substantial (the most conservative is around $8 billion a year) and that the issue merits greater research and policy attention. An important first step would be a Swiss commitment to meet international norms of trade transparency. We welcome comments to acobham@cgdev.org. We are grateful to

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“…2 Clausing (2003) is a notable exception in that she analyzes U.S. data on intrafirm transfer prices to understand in what direction and to what extent these prices differ from those charged in outside markets due to tax rate differentials. 3 Present international tax rules attempt to moderate -at least to some extent -these tax arbitrage activities through the principle that transactions within MNEs should be valued at their "arm's length" price, i.e. the price that would be paid by unrelated parties for similar transactions (OECD, 1995).…”

Section: Introductionmentioning

confidence: 99%

“…2 See, e.g., Jenkins and Wright (1975), Grubert and Mutti (1991), Harris et al (1993), Grubert, Goodspeed and Swenson (1993), Hines and Rice (1994). 3 Her estimates indicate that a tax rate 1 percent lower in the country of destination (origin)…”

Section: Introductionmentioning

confidence: 99%

Investment Liberalization and the Geography of Firm Location

Amerighi¹

2008

Foreign Direct Investment and the Multinational Enterprise

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We set up a symmetric two-country model with two multinationals competing on the quantities and possibly manipulating their transfer prices.Governments choose both the corporate profit tax rate and the level of enforcement of the "arm's length" principle. We show that stronger enforcement increases equilibrium tax rates. We also find that a larger international ownership of multinationals leads to a "race to the top" in both policies between the two countries, while trade liberalization initially implies a "race to the bottom". But as trade becomes free enough, a further decrease in trade costs raises equilibrium tax rates and enforcement policies.

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Tax-motivated transfer pricing and US intrafirm trade prices

Cited by 419 publications

References 10 publications

Evidence for Profit Shifting with Tax-sensitive Capital Stocks

Evidence for Profit Shifting with Tax-sensitive Capital Stocks

Estimating Illicit Flows of Capital via Trade Mispricing: A Forensic Analysis of Data on Switzerland

Investment Liberalization and the Geography of Firm Location

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