Transfer Pricing and International Tax Competition: Emerging Economies' Dilemma

Abstract

Transfer pricing and international tax competition have increasingly become pivotal issues for emerging economies in the global economic landscape. As multinational corporations (MNCs) continue to expand their operations across borders, tax strategies such as transfer pricing become more sophisticated, often leading to base erosion and profit shifting (BEPS). Emerging economies face the challenge of balancing the need to attract foreign direct investment (FDI) through competitive tax policies with the need to protect their tax base from erosion. This paper delves into the complexities surrounding transfer pricing, the global shift towards fair taxation, and the dilemma faced by emerging economies in the face of international tax competition. We explore the policies, regulations, and frameworks that aim to curb tax avoidance, while also analyzing the role of global tax organizations like the OECD in setting norms for tax transparency and compliance.