At A Cost: the Real Effects of Transfer Pricing Regulations

Unilateral adoption of transfer pricing regulations may have a negative impact on real investment by multinational corporations (MNCs). This paper uses a quasi-experimental research design, exploiting unique panel data on domestic and multinational companies in 27 countries during 2006-2014, to find...

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Bibliographic Details
Main Author: Mooij, Ruud A.
Other Authors: Liu, Li
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2018
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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653 |a International Taxation 
653 |a Public finance & taxation 
653 |a Transfer pricing 
653 |a Taxes 
653 |a Double taxation 
653 |a Corporations; Taxation 
653 |a Transnational corporations 
653 |a Economic sectors 
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653 |a Business Taxes and Subsidies 
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653 |a International business enterprises 
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653 |a Transfer pricing rules 
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653 |a Thin capitalization rules 
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520 |a Unilateral adoption of transfer pricing regulations may have a negative impact on real investment by multinational corporations (MNCs). This paper uses a quasi-experimental research design, exploiting unique panel data on domestic and multinational companies in 27 countries during 2006-2014, to find that 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