Comparative analysis of transfer pricing methods

Abstract

The relevance of the study is обусловed by the fact that in the context of the globalization of the world economy and the active development of multinational corporations, the importance of transfer pricing is increasing as a tool of intra-group financial regulation, which, on the one hand, ensures effective profit management, and on the other hand, creates risks of tax base erosion and profit shifting between jurisdictions. The purpose of the article is to study the theoretical and methodological paradigm of transfer pricing in the context of conducting a comparative analysis of methods, taking into account their economic essence, application tools, and relevance under globalization conditions. The research methods include general scientific and specific methods of cognition, in particular: analysis and synthesis – to generalize theoretical approaches to transfer pricing; comparative analysis – to assess the advantages and disadvantages of methods; a systematic approach – to examine the mechanism of applying the arm’s length principle; statistical analysis – to assess the scale of profit shifting and tax revenue losses using the example of the United States. The results of the study have shown that the application of different transfer pricing methods has specific features, advantages, and limitations determined by the nature of controlled transactions, the level of data availability, and the degree of comparability. It has been established that the most effective compliance with the arm’s length principle is achieved through a comprehensive approach that involves a justified selection of the method, identification of the tested party, use of relevant financial indicators, and application of an arm’s length range of profitability. It has been proven that improper use of transfer pricing mechanisms can lead to significant tax revenue losses and distortion of the competitive environment. It is concluded that the effective application of transfer pricing methods is a key condition for ensuring transparency of financial flows of multinational corporations and compliance with tax legislation. It is substantiated that the choice of method should be based on the economic substance of transactions, functional analysis of the parties, and the level of data comparability.