How Transfer Pricing Affects Global Supply Chains in Developing Markets

Abstract

This research paper explores the critical role of transfer pricing in global supply chains, particularly focusing on its implications for developing markets. Transfer pricing refers to the prices at which services, goods, and intangibles are traded between related entities within multinational enterprises (MNEs). As globalization continues to expand, developing markets increasingly become integral parts of global supply chains. This paper examines the methodologies of transfer pricing, its regulatory frameworks, and the economic effects it produces in developing economies. The analysis is underscored by the need for MNEs to optimize tax liabilities while complying with local regulations. Furthermore, the paper highlights the influence of transfer pricing on supply chain efficiency, local economic development, and corporate governance. The findings suggest that while transfer pricing can lead to tax optimization for MNEs, it may also pose significant challenges for developing markets, including revenue losses and distorted local economic dynamics.