Discussion Paper Details

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Title: Knocking on Tax Haven?s Door: Multinational Firms and Transfer Pricing

Author(s): Ronald Davies, Julien Martin, Mathieu Parenti and Farid Toubal

Publication Date: September 2015

Keyword(s): pricing to market, tax havens and transfer pricing

Programme Area(s): International Macroeconomics and Finance, International Trade and Regional Economics and Public Economics

Abstract: This paper analyzes the transfer pricing of multinational firms. Intra-firm prices may systematically deviate from arm?s length prices for two motives: pricing to market and tax avoidance. Using French firm-level data on arm?s length and intra-firm export prices, we find that the sensitivity of intra-firm prices to foreign taxes is reinforced once we control for pricing-to-market determinants. Most importantly, we find no evidence of tax avoidance if we disregard tax haven destinations. Tax avoidance through transfer pricing is economically sizable. The bulk of this loss is driven by the exports of 450 firms to ten tax havens.

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Bibliographic Reference

Davies, R, Martin, J, Parenti, M and Toubal, F. 2015. 'Knocking on Tax Haven?s Door: Multinational Firms and Transfer Pricing'. London, Centre for Economic Policy Research.