Ethical Issues in Transfer Pricing

Abstract:     
Most papers on transfer pricing deal either with technical aspects of the topic or strategy. Research on ethical aspects of transfer pricing is almost totally absent from the business literature and is scantly covered in the ethics literature. The purpose of this paper is to fill that gap. Transfer pricing presents managers with several ethical issues. There is a legal obligation to pay taxes but there is also a fiduciary duty to shareholders to maximize profits. Someone stands to be harmed regardless of what kind of transfer policy is adopted but whether this harm constitutes unethical conduct has not been adequately explored. The author applies ethical theory to resolve these issues.

Keywords: Ethics, Transfer Pricing, Chargeback, Section 482, Harm, Fiduciary Duty, Tax Avoidance, Tax Evasion, Social Responsibility

JEL Classification: D6, F1, F23, F36, G1, H2, H26, K34, L14, L21, L22, L23, M14, M4, O1

Accepted Paper Series