Profit shifting through transfer pricing: evidence from French firm level trade data

Mardi | 2015-02-10
Sully 5, 16h-17h20


This paper provides direct evidence of profit shifting to low tax jurisdictions by multinational companies through transfer prices. Using detailed firm level export and import data by destination and product for France, I show that the price wedge between arm’s length trade and related party trade varies systematically with the differential in corporate tax rate between France and the partner country. Profit shifting through transfer prices is estimated to have reduced the French corporate tax base by 8 bn USD in 2008, and its extent is growing over 2000s in France. Though significant, the manipulation of transfer prices on trade in goods accounts for a limited share only of the estimated total profit shifting by multinational companies.