Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320108 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11887
Publisher: 
CESifo GmbH, Munich
Abstract: 
We study how the OECD transfer pricing guidelines aimed at curbing tax-motivated transfer pricing practices affect investment incentives. Our theoretical model integrates the different OECD's transfer pricing methods into the tax planning cost function of an MNC to evaluate how the choice of transfer price and quantity produced determine the amount of profit shifted. When the transfer pricing method used emphasizes the choice of transfer price over the choice of the quantity of the intermediate good, tax-motivated transfer pricing has positive investment effects. However, when the transfer pricing method treats profit shifting by price and quantity symmetrically, tax-motivated transfer pricing does not impact investment on the intensive margin. Our study has potential policy implications and also produces suggestions for empirical research on transfer pricing and investment.
Subjects: 
multinational corporations
corporate tax avoidance
transfer pricing
OECD transfer pricing rules
investment effects
JEL: 
H25
F23
M48
H26
Document Type: 
Working Paper
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