International Transfer Price Regulations: Empirical Evidence from Australia and Canada
Posted: 16 Sep 1996
Date Written: Undated
For the past few decades, transfer prices have been a major source of conflict between governments and multinational firms. During the late 1980s and early 1990s, many countries established regulations aimed at limiting firms' abilities to avoid taxes through transfer pricing policies that move income to low tax subsidiaries. This research examines the arguments made by governments and by firms with regard to intra-firm transfers among subsidiaries in high and low-tax domiciles. Two types of regulation are described and predictions about the effects of the regulations are discussed and then tested using an event study methodology. Empirical analysis of a sample of Australian and Canadian firms provides evidence of market reactions to two different types of regulations that limited the ability of firms to avoid taxes using transfer pricing policies.
JEL Classification: K34, M40, M46
Suggested Citation: Suggested Citation