Journal • CITN Journal

Editorial Board

Editor-in-Chief

Professor Rafiu Oyesola Salawu

Department of Management & Accounting, Faculty of Administration, Obafemi Awolowo University, Ile-Ife

Managing Editor

Professor Godwin Emmanuel Oyedokun

Department of Management & Accounting, Lead City University, Ibadan, Nigeria

Editorial Board Secretary

Mary-Fidelis Chidoziem Abiahu

Director, Research and Professional Standard, Chartered Institute of Taxation of Nigeria

Editorial Board Members

Professor Chinedum Nathaniel Nwezeaku

Federal University of Technology, Owerri

Professor John Adeoti

Nigeria Institute of Social and Economic Research (NISER), Ibadan

Professor Uche Jack-Osimiri

Faculty of Law, River State University, Port Harcourt

Professor Aruwa Suleiman Akwu-Odo Salihu

Nasarawa State University, Keffi Nasarawa State Nigeria

Dr. Eiya Ofiafoh Ofiafoh (Associate Professor)

Department of Accounting, University of Benin, Benin City, Nigeria

Dr. Stephen Chukwuemeka Mark Abani

MCSA Worldwide Projects Limited, Abuja, Nigeria

Dr. Kenny Adedapo Soyemi

Department of Accounting, Olabisi Onabanjo University, Ago Iwoye, Ogun State, Nigeria

Professor Joseph Uchenna Uwaleke

Department of Banking & Finance, Nasarawa State University, Keffi Nasarawa State, Nigeria

Barrister Chukwuemeka Eze

Faculty of Law, Nasarawa State University, Keffi Nasarawa State, Nigeria

Mr. Simon Nwanmaghyi Kato

Federal Inland Revenue Service, Chairman’s Office, Abuja, Nigeria

TRANSFER PRICING AND TAX BASE EROSION: A LITERATURE REVIEW

Description

TRANSFER PRICING AND TAX BASE EROSION: A LITERATURE REVIEW

Authors

IBADIN O. Peter and ODIA E. Isaac

Abstract

The paper examined transfer pricing and tax base erosion. To achieve this objective, a librarybased approach was employed with a deep review of prior investigations on transfer pricing practices and their outcomes and how they were used to achieve tax base erosion. To this end, multinational companies (MNCs) are mainly the key players which adapt, set and adopt transfer prices that enable them to shift profit from high tax regions to low-tax jurisdictions. However, domestic group transfer pricing practices may also reflect sharp practices that allow them to minimize their aggregate tax liability. Common objects of transfer pricing abuse are found to be in transaction types in the form of intangibles, contracts, intra-company sales and purchases, management services, trade, cost sharing, amongst others. Therefore, price setting in the context of artificial price management is found to be entrenched in these objects. Given that such artificial price management, for all intents and purposes, are not based on arm’s length principles, it is deemed as tax evasion or scam which amounts to illegality. To this extent, transfer pricing is extensively used to erode the much-needed tax revenue of countries, Nigeria inclusive, where these MNCs operate. It is against this background that it is suggested that the government of every nation should ensure that adequate sanctions are institutionalized against erring companies through a regular review of transfer pricing regulations. It is also expected that local content laws should be updated and adequate in order to prevent unnecessary importation of inputs.

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