Tax-motivated transfer mispricing in South Africa: Direct evidence using transaction data
Research output: Working paper
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Tax-motivated transfer mispricing in South Africa : Direct evidence using transaction data. / Wier, Ludvig.
Helsinki, Finland : UNU-WIDER, 2018.Research output: Working paper
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TY - UNPB
T1 - Tax-motivated transfer mispricing in South Africa
T2 - Direct evidence using transaction data
AU - Wier, Ludvig
PY - 2018
Y1 - 2018
N2 - This paper provides the first direct systematic evidence of profit shifting through transfer mispricing in a developing country. Using South African transaction-level customs data, I directly test for transfer price deviations from arm’s-length pricing. I find that multinational firms in South Africa manipulate transfer prices in order to shift taxable profits to low-tax countries. The estimated tax loss is 0.5 per cent of corporate tax payments. My estimates do not support the common belief that transfer mispricing in South Africa is more severe than in advanced economies. I find that an OECD-recommended reform had no long-term impact on transfer mispricing but argue that the method used in this paper provides a cost-efficient way to curb transfer mispricing.
AB - This paper provides the first direct systematic evidence of profit shifting through transfer mispricing in a developing country. Using South African transaction-level customs data, I directly test for transfer price deviations from arm’s-length pricing. I find that multinational firms in South Africa manipulate transfer prices in order to shift taxable profits to low-tax countries. The estimated tax loss is 0.5 per cent of corporate tax payments. My estimates do not support the common belief that transfer mispricing in South Africa is more severe than in advanced economies. I find that an OECD-recommended reform had no long-term impact on transfer mispricing but argue that the method used in this paper provides a cost-efficient way to curb transfer mispricing.
KW - Faculty of Social Sciences
KW - tax
KW - international taxation
KW - profit shifting
KW - multinational firms
KW - developing countries
M3 - Working paper
SN - 978-92-9256-050-8
T3 - UNU WIDER Working Paper Series
BT - Tax-motivated transfer mispricing in South Africa
PB - UNU-WIDER
CY - Helsinki, Finland
ER -
ID: 212425792