The growing abuse of transfer pricing by MNCs By Kavaljit Singh

Not only do MNCs reap higher profits by manipulating transfer pricing: there is also a substantial loss of tax revenue to countries, particularly developing ones, that rely more on corporate income tax to finance their development programmes. Besides, governments are already under pressume to lower taxes as a means of attracting investment or retaining a corporation’s operations in their country. This leads to a heavier tax burden on ordinary citizens for financing social and developmental programmes. Although several instances of fictitious transfer pricing have come to public notice in recent years, there are no reliable estimates of the loss of tax revenue globally. The Indian tax authorities are expecting to garner an additional US$111 million each year from with the help of new regulations on transfer pricing introduced in 2001.

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