OECD Guidelines on Transfer Pricing: A Global Evaluation of Their Impact on Profit Shifting

Abstract

The Organization for Economic Co-operation and Development (OECD) has long sought to create a unified framework for international taxation, particularly in the realm of transfer pricing. Transfer pricing—the rules governing transactions between related enterprises within multinational corporations (MNCs)—poses significant challenges for tax authorities and corporations alike. The OECD Guidelines on Transfer Pricing, especially post-Base Erosion and Profit Shifting (BEPS) project, aim to prevent profit shifting and ensure that profits are taxed where economic activities generating the profits are performed. This paper evaluates the global impact of these guidelines, focusing on how they have influenced the practices of profit shifting by MNCs and the responses of national tax authorities. A comprehensive analysis of the guidelines, their theoretical underpinnings, practical implications, and effectiveness in curbing tax avoidance is provided. Ultimately, this paper examines the evolving relationship between global taxation policy and corporate tax strategies.