Cover IMF Working Papers
Keeping it Simple–Efficiency Costs of Fixed Margin Regimes in Transfer Pricing
Author:
Sebastian Beernull

Search for other papers by Sebastian Beer in
Current site
Google Scholar
PubMedClose
,
Sebastien Leducnull

Search for other papers by Sebastien Leduc in
Current site
Google Scholar
PubMedClose
, and
Jan Loepricknull

Search for other papers by Jan Loeprick in
Current site
Google Scholar
PubMedClose
Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 193
Language:
English
Publication Date:
23 Sep 2022
DOI:
https://doi.org/10.5089/9798400219221.001
ISBN:
9798400219221
ISSN:
1018-5941
Pages:
27
Keywords:
Taxation of Multinational Enterprises; Transfer Pricing Simplification; Efficiency Costs; modelling transfer pricing Benchmarking; efficiency cost; annex I. descriptive statistics; simplification option; transfer pricing practice; efficiency loss; Transfer pricing; Total factor productivity; Productivity; Tax wedge; Manufacturing; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (3.2 MB) Download Epub
Simplifying tax policy comes with costs and benefits. This paper explores simplification options for the taxation of MNEs, an area where administrative and compliance costs of the current rules are large. Simplified approaches seek to reduce these costs by relying on an approximation of the true tax base, potentially distorting resource allocation. We examine the efficiency cost of transfer pricing simplification theoretically and empirically. Using a sample of 300,000 firms located in 22 countries, we estimate that common transfer pricing practices reduce efficiency between 0.25 and 2.2 percent of total factor productivity across sectors. Focusing on the manufacturing sector, we then observe that simplification more than doubles sectoral inefficiency on average. However, large differences exist, with moderate efficiency costs in several sectors.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2022: Issue 193