Is transfer pricing strictness deterring profit shifting within multinationals? Empirical evidence from Europe
构建了衡量各国转让定价框架严格程度的指数，发现2001-2009年间欧洲各国监管趋严，且严格性越高，跨国公司对税率差异的利润转移行为越少。
This paper examines the extent to which the introduction and tightening of transfer pricing frameworks deter income shifting strategies by European multinational companies. To do so, we have built an index that measures the transfer pricing framework strictness by host country and year. Then, tax rate differentials are used to capture profit-shifting incentives and are interacted with the strictness index to assess whether the host country's transfer pricing framework impacts profit-shifting behaviour. The index is shown to increase significantly over the sample period, indicating that the scrutiny of related party transactions by European governments has increased over the period 2001–2009. Using a sample of European foreign subsidiaries, the results suggest that the stricter the transfer pricing framework the lower the tax rate difference sensitivity of reported earnings. This indicates that tightening the transfer pricing framework is capable of dissuading multinational companies from shifting profits from higher- to lower-tax countries.