Afro-Asian J. of Finance and Accounting   »   2016 Vol.6, No.3



Title: Testing the existence of transfer pricing in Vietnam


Authors: Nguyen Khac Quoc Bao; Nguyen Huu Huy Nhut; Nguyen Dinh Tri


University of Economics Ho Chi Minh City, 59C Nguyen Dinh Chieu Street, Dist 3, HCMC, Vietnam
University of Economics Ho Chi Minh City, 59C Nguyen Dinh Chieu Street, Dist 3, HCMC, Vietnam
101 Thoai Ngoc Hau Street, Tan Phu Dist, HCMC, Vietnam


Abstract: Transfer pricing or the manipulation of transfer prices is to set the price of intra-firm transactions different from market prices in order to shift incomes from high-tax locations to low-tax ones. Hence, a multinational corporation can decrease its global tax burden. The study applies the model of transfer pricing incentive of Swenson (2001) by employing generalised method of moments (GMMs) to examine the effect of income tax rate and tariff rates on the setting of transfer prices in ten commodity groups of multinationals operating in Vietnam during the period of 2008-2013. The study concludes a positive correlation between changes of transfer pricing incentives and changes of reported transfer prices. Furthermore, the findings also show that increases in Vietnamese income tax rate lead to decreases in income tax rate in the headquartered country of parent firms, or Vietnamese tariff rate. Additionally, the level of reported transfer prices of imports from the parent firm to its affiliates in Vietnam will increase the majority of investigated commodity groups (except motor vehicles).


Keywords: transfer pricing incentives; tariff rates; income tax rates; generalised method of moments; GMM; Vietnam; transfer prices; multinational corporations; MCNs; multinationals; parent firms; affiliates.


DOI: 10.1504/AAJFA.2016.079292


Afro-Asian J. of Finance and Accounting, 2016 Vol.6, No.3, pp.224 - 240


Date of acceptance: 14 Dec 2015
Available online: 21 Sep 2016



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