The Evolution of Transfer Pricing in North America's Digital Economy

Abstract

Transfer pricing has emerged as a significant issue in the context of North America's rapidly expanding digital economy. Multinational corporations (MNCs) often leverage transfer pricing to allocate profits across various jurisdictions, a practice that has evolved with the rise of digital business models. This paper delves into the historical development, regulatory responses, and economic impact of transfer pricing in the digital age, focusing on North America. It critically analyzes how technological advancements have altered the traditional methods of profit allocation, while also assessing the policy frameworks implemented by the United States, Canada, and Mexico to mitigate profit shifting and base erosion. The paper concludes by discussing the challenges that still persist and offers suggestions for creating a more cohesive and adaptive global tax system.