Transfer pricing and developing countries: Some problems of investigation

This paper reviews some of the main problems which arise for developing host countries in the investigation of transfer pricing of commodity trade by transnational corporations in manufacturing industry. The paper deals in turn with the following: the problems raised by the fact that the extent of intra-firm trade and the potential for manipulating transfer prices from case to case, especially because of the nature of technological innovation; the main handicaps faced by host developing country governments in collecting data on transfer pricing; and, the difficult conceptual issues that arise in defining the correct reference prices by which transfer prices may be judged. It concludes with the suggestion that intercountry cooperation is the most promising course of action in order to surmount these problems.