Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/204785
Authors: 
Lassmann, Andrea
Zoller-Rydzek, Benedikt
Year of Publication: 
2019
Series/Report no.: 
KOF Working Papers No. 450
Abstract: 
This paper examines the determinants and margins of profit shifting through transfer pricing. We develop a theory model, where transfer pricing patterns are governed by a generalized concealment cost function (CCF). Our empirical analysis draws on micro-level data about transaction-level imports, firm-level characteristics, as well as tax differentials between regions in Switzerland and countries abroad. We find, both theoretically and empirically, that more productive multinational firms deviate less from the arms' length price and trade lower quantities, compared to MNEs with lower productivity. Moreover, the decision of firms to engage in transfer pricing depends negatively on a fixed cost component in the CCF, as well as trade costs. The model allows us to estimate a theory-consistent concealment cost function, which can be used for counterfactual analysis.
Subjects: 
Multinational firms
tax avoidance
tax havens
transfer pricing
JEL: 
F23
H25
H26
H32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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