Purpose: The purpose of this paper is to examine the existence of income shifting using the practice of transfer pricing (TP), not only in sales but also in purchase and management service transactions, in Asian developing countries. The paper also investigates the role of the specific anti-avoidance rules (SAAR) in preventing TP practices in various types of transaction. Design/methodology/approach: The research employs panel data from a sample of 200 subsidiaries in ten countries over the period 2010–2014. Findings: Different results were obtained from previous research on developed countries, which found that TP practice was proven in sales transactions. This study finds no evidence for TP practices in sales transactions, but that they do take place in purchase, management service fee and management services revenue transactions. The study also finds evidence that SAAR reduces the practice of TP in sales transactions. Originality/value: The research investigates TP practices, not only those related to sales, but also to purchases, management service fees and management service revenue to related parties. The sample comprises multinational subsidiaries located in Asian developing countries that have rarely been investigated in previous studies. This research examines the effect of SAAR in preventing TP practices in various types of transaction and develops scoring based on an instrument that integrates each SAAR rule/requirement.
- Income shifting
- Specific anti-avoidance rules
- Transfer pricing