Emerging Economies and Transfer Pricing: Navigating the Challenges of International Tax Competition

Abstract

Abstract:

Emerging economies have become critical players in the global market, attracting foreign direct investment and enhancing international trade. However, the complexities of transfer pricing, which refers to the pricing of goods, services, and intangibles between related parties across borders, present significant challenges for these economies. This paper examines the implications of transfer pricing in the context of international tax competition, particularly for emerging markets. It highlights the strategies employed by multinational enterprises (MNEs) to exploit transfer pricing rules for tax optimization, the regulatory responses from governments, and the need for a balance between attracting investment and ensuring fair tax practices. The findings underscore the necessity for emerging economies to develop robust transfer pricing frameworks that not only comply with international standards but also safeguard their tax bases.