Dark Side of Transfer Pricing: new AABA paper
"transfer pricing continues to be, and will remain, the most important international tax issue facing MNEs (multinational enterprises.)"
This is so significant that it is not just about corporate profits: the paper cites one analysis as saying
"transfer pricing may be playing an important role in aggregate national accounting, potentially reducing the reported value of exports and the current account (and thus GDP)"
A few days ago, Bloomberg cited a study that estimates
"$60 billion in annual U.S. tax revenue [is] lost to thousands of companies’ income shifting, according to a study published in December in the National Tax Journal by Kimberly A. Clausing, an economics professor at Reed College in Portland, Oregon."
Stuffed with egregious examples, the paper makes a useful introduction to, and overview of, the issues. The paper concludes:
"We would suggest that research into politics of transfer pricing presents considerable opportunities for illuminating capital flight, tax avoidance, complexities of globalization and the deepening crisis of the state. Such a research agenda would place transfer pricing in broader social, political and organizational contexts and show how with the support of professionals (e.g. accountants, lawyers) accounting techniques are mobilized to allocate and retain wealth."
TJN will be pleased to contribute to this agenda.