Minimizing tax burdens in the 21st century: transfer pricing by European MNEs

Using firm-level panel data, this thesis addresses transfer pricing behaviour by European MNEs. It analyses a comprehensive dataset containing more than 24,000 observations for the years 2009-2017. The panel regressions suggest that European MNEs report higher profits in low-tax countries, and vice versa. The preferred estimation reports a semi-elasticity of reported operating profits to the top statutory tax rate of -1.3. There thus remains scope for present-day MNEs to reduce their global tax burden through transfer pricing. Separate models contain a proxy for the effective transfer pricing laws. These indicate that introduction of transfer pricing laws decreases the transfer pricing incentive of MNEs. Hence, the results suggest that governments will need to adopt additional legislation to further counteract transfer pricing manipulation.