The Effects of Transfer Pricing on Global Tax Competition: A Study of Emerging Markets

Abstract

Transfer pricing, the method by which companies allocate income and expenses among their various subsidiaries, plays a crucial role in international tax competition, particularly for emerging economies. This research paper investigates how transfer pricing influences tax competition among these nations, analyzing the implications for tax policy, investment strategies, and economic growth. The study utilizes a case study approach, focusing on several emerging economies to understand the nuanced effects of transfer pricing on their fiscal frameworks. The findings indicate that while transfer pricing can lead to significant tax revenue losses, it also incentivizes countries to reform their tax policies to remain competitive. The paper concludes with recommendations for policymakers to adopt effective measures to manage transfer pricing while promoting fair tax competition.