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

Ronald B. Davies; Julien Martin; Mathieu Parenti; Farid Toubal

doi:10.1162/rest_a_00673

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

Ronald B. Davies¹; Julien Martin²; Mathieu Parenti³; Farid Toubal⁴

¹ University College Dublin · ² Université du Québec à Montréal and CEPR · ³ Université Libre de Bruxelles, and CEPR · ⁴ Ecole Normale Supérieure de Cachan, CREST, and CEPII

The Review of Economics and Statistics 2018 open access

This paper analyzes the transfer pricing of multinational firms. Intrafirm 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 intrafirm export prices, we find that the sensitivity of intrafirm prices to foreign taxes is reinforced once we control for pricing-to-market determinants. Most important, 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.

DOI: 10.1162/rest_a_00673
Volume: 100 (1)
Pages: 120-134
Language: en
Export: BibTeX
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