THE DARK SIDE OF TRANSFER PRICE: SHED LIGHT ON THE MOST CRITICAL ISSUES FOR TAX AUTHORITIES

Abstract

The rise of Multinational Enterprises (MNEs) during the last decades has been accompanied by the explosion of the number of subsidiaries all over the world. Thanks to the closeness to raw materials and skilled labour MNEs have adopted an accounting system based on transfer price to account imports and exports of the resources. During years, these corporations have used their subsidiaries to shift profits from high-tax countries to low-tax countries in order to avoid tax system. The manipulation of transfer pricing has started to be one of the principle issue for tax authorities and governmental institutions, that they registered a negative disproportion between the rise of corporate income tax and the tax revenue. Through the analysis of examples of MNEs, both in developed and emerging countries, who used transfer pricing to avoid tax, with a focus on Intellectual Property assets, the final goal of this research is to highlight the critics of actual regulation system in order to give an idea about this issue and try to design some solutions.