Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/190170 
Authors: 
Year of Publication: 
2018
Series/Report no.: 
WIDER Working Paper No. 2018/123
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
This paper provides the first direct systematic evidence of profit shifting through transfer mispricing in a developing country. Using South African transaction-level customs data, I directly test for transfer price deviations from arm's-length pricing. I find that multinational firms in South Africa manipulate transfer prices in order to shift taxable profits to low-tax countries. The estimated tax loss is 0.5 per cent of corporate tax payments. My estimates do not support the common belief that transfer mispricing in South Africa is more severe than in advanced economies. I find that an OECD-recommended reform had no long-term impact on transfer mispricing but argue that the method used in this paper provides a cost-efficient way to curb transfer mispricing.
Subjects: 
tax
international taxation
profit shifting
multinational firms
developing countries
JEL: 
H25
H26
H87
O23
Persistent Identifier of the first edition: 
ISBN: 
978-92-9256-565-7
Document Type: 
Working Paper

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