Global Supply Chains and Transfer Pricing: Implications for Developing Countries

Abstract

The dynamics of global supply chains (GSCs) have evolved significantly in the past few decades, becoming integral to international trade and economic growth. Transfer pricing (TP), the method of pricing transactions between related entities in a multinational corporation, plays a crucial role in determining the allocation of profits and costs within these supply chains. This paper explores the implications of GSCs and TP for developing countries, focusing on how these concepts influence economic growth, tax revenues, regulatory challenges, and the overall business environment. Through a comprehensive analysis, it is evident that while GSCs offer opportunities for developing nations to integrate into the global economy, the complexities of transfer pricing can lead to significant challenges, including tax avoidance, regulatory inefficiencies, and unequal power dynamics in negotiations. This paper ultimately underscores the need for effective regulatory frameworks and international cooperation to enhance the benefits of GSCs while mitigating the adverse effects of transfer pricing practices.