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Effects of transfer pricing beyond tax revenue loss: a threat to economic development


Transfer pricing and its negative impact on tax revenue generation is an issue that has been well discussed and documented. There is significant empirical literature that analyses how transfer pricing abuse negatively affects tax revenue generation and the wider impact on development and poverty alleviation. However, the effects on labour disempowerment, poor management of resources, distortion of information for entrepreneurial development and investment, challenges with implementation of tax related government policies, and their multiplier effect on extreme poverty have not received equivalent public attention. A deeper analysis of these other effects highlights that tax dodging perpetuates extreme poverty and creates serious economic distortions that hinder sound investment decisions in economies where the practice is predominant.