The Increasing Importance of Transfer Pricing Regulations – a Worldwide Overview


As the number of multinational enterprises increases, the number of transactions between entities belonging to the same multinational group rises as well. Intercompany transactions generally offer the opportunity to shift income from one jurisdiction to the other. Income shifting can be driven by tax aspects, for instance a tax rate differential, or by firm-specific tax attributes like tax losses. At the same time, profit shifting imposes risk to governments as it may reduce tax revenues. More and more governments are therefore introducing and extending transfer pricing regulations in order to combat profit shifting through intercompany transactions. This study examines 44 countries and analyses the development of different aspects of transfer pricing regulations over a time period of nine years (2001-2009). In order to show the differences of the regulations in a single measure, an attempt is made to categorize transfer pricing regulations regarding their stringency and impact. The results of the categorization confirm not only the increasing importance of transfer pricing regulations, but also offer very useful and valuable information for future research on the influence of transfer pricing regulations on corporate decisions.