The abuse of transfer pricing by multinational enterprises (MNEs) is a topical issue the world over. Abusive transfer pricing results in the erosion of tax bases and profit shifting from countries with high tax rates to those with lower tax rates, thus enabling tax avoidance and evasion. Developing countries are argued to suffer most under the negative impacts of transfer pricing manipulation. This study investigates the strategies employed by MNEs to minimise their tax burden in developing countries. An understanding of the motives and strategies is fundamental in tax policy crafting and improvements that effectively respond to transfer pricing. Adopting the interpretivist research philosophy with the use of in-depth interviews with tax officers, tax consultants and Ministry of Finance Officials, the study established that amongst the transfer pricing schemes used by MNEs in Zimbabwe, the predominant one was the use of service fees. The most notable being management fees, this was a contribution to knowledge as this strategy was found to be scarcely discussed in literature and there was very little empirical evidence to back its existence. The study recommended use of targeted approaches by the revenue authority to minimise revenue losses through intragroup services.The findings serve as vital information for policymakers, revenue authorities and tax auditors.
Portfolio diversification in capital markets is an accepted investment strategy. On the other hand corporate diversification has drawn many opponents especially the agency theorists who argue that executives must not diversify on behalf of share holders. Diversification is a strategic option used by many managers to improve their firm's performance. While extensive literature investigates the diversification performance linkage, little agreements exist concerning the nature of this relationship. Both theoretical and empirical disagreements abound as the extensive research has neither reached a consensus nor any interpretable and acceptable findings. This paper looked at diversification as a corporate strategy and its effect on firm performance using Conglomerates in the Food and Beverages Sector listed on the ZSE. The study used a combination of primary and secondary data. Primary data was collected through interviews while secondary data were gathered from financial statements and management accounts. Data was analyzed using SPSS computer package. Three competing models were derived from literature (the linear model, Inverted U model and Intermediate model) and these were empirically assessed and tested.
Base erosion and profit shifting activities of multinational enterprises (MNEs) have been a hot issue globally. Topical among the strategies employed by MNEs has been the issue of transfer pricing (TP). Developing countries are argued to be significantly affected by TP manipulation resulting in substantial tax revenues being lost. As a response to curb the unfavourable impacts of transfer mispricing, most developing countries have adopted the OECD TP guidelines and enacted TP legislation to regulate TP activities. The arm’s length principle is the core of TP legislation, yet it has brought challenges for tax administrators and their auditors in enforcing and assessing compliance respectively leading to disputes. In view of the ever-changing business world and continuous efforts by MNEs to minimise their tax obligations through income shifting, it was imperative to assess the factors affecting the effectiveness of TP audits and dispute resolutions as measures to enhance compliance and enforcement in developing countries, with specific reference to Zimbabwe. Findings include the lack of clarity in TP legislation, resource constraints and complexity of transactions, lack of expertise as well as the shortage of comparable data. Developing countries are encouraged to formulate clear TP regulations and invest in the capacitation of revenue authorities.
that the tacit collusion between TCs and MNCs sanitise the abusive TP activities by minimising the chances of the MNCs shenanigans being recognised by the tax authority due to information asymmetry. Further, the mediating role of TCs is polarised and benefits the TCs and the MNCs who will share the spoils at the expense of the tax authority.
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