Evaluating OECD Guidelines: The Role of Transfer Pricing in Mitigating Profit Shifting

Abstract

This paper investigates the significance of the OECD guidelines on transfer pricing in the context of mitigating profit shifting by multinational enterprises (MNEs). The phenomenon of profit shifting has become a major cause for concern as MNEs take advantage of differences in various countries' tax systems in order to evade taxes and cause material losses for governments. Base Erosion and Profit Shifting (BEPS) project is located at the Organisation for Economic Co-operation and Development (OECD) and this project is aimed to reduce the lack of global coordination resulted from such disparities and put the national tax regulations in alignment with the economic activities. This paper will also discuss the effect of the various tax laws, in relation to transfer pricing, on the challenges faced in the higher income countries as agents and taxpayers.