Table 1 Impact of transfer pricing on... | Emerald Publishing

Table 1

Impact of transfer pricing on tax revenues and base erosion

Author	Methodology	Finding	Theoretical gap	Empirical gap	Problem
de Mooij and Liu (2020)	Quasi-experimental research and difference in difference approach	Transfer pricing regulations lead to an 11% reduction in investment by MNC affiliates	No analysis of how transfer pricing rules impact investment choices	The study does not investigate if transfer pricing rules affect MNCs differently based on their size, age, ownership, or sectoral composition of affiliates	Exploring alternative policy options for addressing tax avoidance by MNCs
Vicard (2015)	Regression Analysis	Transfer pricing by MNCs shifts earnings to low-tax countries, causing tax base issues and international imbalances		Focuses on French trade data at the corporate level	Examining the impact of profit shifting on other countries' tax bases and international imbalances
Flanagan (2017)	Utilizes unique transaction-level microdata to measure firm-level transfer-price differentials	Transfer pricing by MNCs underreports earnings and costs countries' tax revenue	Does not explore how production costs or market conditions may affect transfer pricing behavior	The paper only focuses on U.S. multinational firms and their transfer pricing behavior	Differential Behavior of Arms-Length and Related Party Trade Flows: A Call for Future Research
Janský and Prats (2015)	Comparison of the profits and taxes made on each MNC asset unit	MNCs with connections to tax havens reported lower profits and asset taxes, eroding the tax base	Does not offer a thorough examination of how profit-shifting affects efforts to advance development in underdeveloped nations	Does not offer a thorough examination of how profit-shifting affects efforts to advance development in underdeveloped nations	Identifying formulae that partly distribute revenues throughout the many operating jurisdictions for the company
Carnahan (2015)	Assessing Financial Accountability and Public Expenditure Analysis	Most taxpayers are aware of their duties. However, only 25% of nations successfully collect taxes, with Asia–Pacific countries performing worse	Does not provide a comprehensive analysis of the different tax policies or methods that developing countries might choose	Political, social, and economic aspects that may affect the implementation of tax reform in emerging nations need to be thoroughly analyzed	Assessing challenges in tax collection and revenue generation, particularly in Asia–Pacific countries

Author	Methodology	Finding	Theoretical gap	Empirical gap	Problem
de Mooij and Liu (2020)	Quasi-experimental research and difference in difference approach	Transfer pricing regulations lead to an 11% reduction in investment by MNC affiliates	No analysis of how transfer pricing rules impact investment choices	The study does not investigate if transfer pricing rules affect MNCs differently based on their size, age, ownership, or sectoral composition of affiliates	Exploring alternative policy options for addressing tax avoidance by MNCs
Vicard (2015)	Regression Analysis	Transfer pricing by MNCs shifts earnings to low-tax countries, causing tax base issues and international imbalances		Focuses on French trade data at the corporate level	Examining the impact of profit shifting on other countries' tax bases and international imbalances
Flanagan (2017)	Utilizes unique transaction-level microdata to measure firm-level transfer-price differentials	Transfer pricing by MNCs underreports earnings and costs countries' tax revenue	Does not explore how production costs or market conditions may affect transfer pricing behavior	The paper only focuses on U.S. multinational firms and their transfer pricing behavior	Differential Behavior of Arms-Length and Related Party Trade Flows: A Call for Future Research
Janský and Prats (2015)	Comparison of the profits and taxes made on each MNC asset unit	MNCs with connections to tax havens reported lower profits and asset taxes, eroding the tax base	Does not offer a thorough examination of how profit-shifting affects efforts to advance development in underdeveloped nations	Does not offer a thorough examination of how profit-shifting affects efforts to advance development in underdeveloped nations	Identifying formulae that partly distribute revenues throughout the many operating jurisdictions for the company
Carnahan (2015)	Assessing Financial Accountability and Public Expenditure Analysis	Most taxpayers are aware of their duties. However, only 25% of nations successfully collect taxes, with Asia–Pacific countries performing worse	Does not provide a comprehensive analysis of the different tax policies or methods that developing countries might choose	Political, social, and economic aspects that may affect the implementation of tax reform in emerging nations need to be thoroughly analyzed	Assessing challenges in tax collection and revenue generation, particularly in Asia–Pacific countries

Source(s): Table created by author