Transfer Pricing & Profit Shifting: Evaluating OECD Guidelines in Combating Tax Avoidance

Abstract

This research paper explores the complex relationship between transfers pricing, profit shifting, and tax avoidance, with a specific emphasis on the guidelines established by the Organization for Economic Co-operation and Development (OECD). As multinational enterprises (MNEs) continue to leverage transfer pricing strategies to allocate profits to low-tax jurisdictions, governments worldwide face significant revenue losses. This paper evaluates the effectiveness of the OECD's Base Erosion and Profit Shifting (BEPS) Action Plan in addressing these challenges. By analyzing the implementation of OECD guidelines in various jurisdictions, the paper seeks to understand their impact on reducing tax avoidance strategies employed by MNEs. The findings reveal that while OECD guidelines have made strides toward enhancing transparency and coherence in international taxation, challenges remain in effective enforcement and compliance. Ultimately, this paper provides recommendations for strengthening the application of OECD guidelines and combating tax avoidance.