Transfer Pricing and Corporate Social Responsibility: Arguments, Views and Agenda

Mineral Economics, 32(3), pp. 353–363 (2019).

26 Pages Posted: 13 Jun 2019 Last revised: 30 Nov 2019

See all articles by Simplice Asongu

Simplice Asongu

African Governance and Development Institute

Joseph I. Uduji

University of Nigeria Enugu Campus

Elda N. Okolo-Obasi

Development Strategy Centre Nigeria

Date Written: May 30, 2019

Abstract

The central thesis of the paper is that Multinational Companies (MNC) should invest in the use of “soft” methods (socially responsible behavior) to mitigate costs in society accrued due to use of “hardcore” tax evasion tactics (Transfer mispricing) to maximize profits from operations in developing countries and/or countries with weak or inefficient tax laws and tax collection institutions. Therefore, we articulate the argument of Corporate Social Responsibility (CSR) as an indirect compensation for transfer mispricing. Our aim is not to present CSR as solution to transfer mispricing. An analytical approach is based on a content analysis of the existing literature with emphasis on a case study. We first discuss the dark side of transfer pricing (TP), next we present the link between TP and poverty and finally we advance arguments for CSR as a compensation for transfer mispricing. While acknowledging that TP is a legal accounting practice, we argue that in light of its poverty and underdevelopment externalities, the practice per se should be a strong defence for CSR because it is also associated with schemes that deprive developing countries of the capital essential for investment in health, education and development programmes.

Keywords: Corporate Social Responsibility; Transfer Pricing; Extreme Poverty

JEL Classification: F20; H20; M14; O11

Suggested Citation

Asongu, Simplice and Uduji, Joseph I. and Okolo-Obasi, Elda N., Transfer Pricing and Corporate Social Responsibility: Arguments, Views and Agenda (May 30, 2019). Mineral Economics, 32(3), pp. 353–363 (2019).. Available at SSRN: https://ssrn.com/abstract=3396641 or http://dx.doi.org/10.2139/ssrn.3396641

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

Joseph I. Uduji

University of Nigeria Enugu Campus ( email )

Department of Accountancy
Box 15540, Enugu
Enugu, NC Enugu 234
Nigeria

Elda N. Okolo-Obasi

Development Strategy Centre Nigeria ( email )

84Nza Street Independence Layout Enugu
Enugu, 400001
Nigeria
08063631111 (Phone)
400001 (Fax)

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