Title: Detecting tax motivated transfer pricing

Authors: Janie Whiteaker-Poe

Addresses: Breech School of Business, Drury University, Springfield, MO 65804, USA

Abstract: This paper provides a method for analysing publicly available financial statement information in order to detect tax-motivated transfer pricing. The key components to the analysis are permanently reinvested earnings, discretionary uncertain tax benefits, and the difference between domestic and foreign tax rates. Extant research indicates that both permanently reinvested earnings and uncertain tax benefits are influenced by transfer pricing. This study demonstrates that the relationship between permanently reinvested earnings and discretionary uncertain tax benefits is moderated by the tax rate differential. The tax rate differential provides companies with the incentive and opportunity to engage in tax-motivated transfer pricing. Finding that the tax rate differential moderates the impact of discretionary uncertain tax benefits on permanently reinvested earnings suggests that companies are engaging in tax-motivated transfer pricing.

Keywords: transfer pricing; tax policy; international taxation; permanently reinvested earnings; uncertain tax benefits; ASC 740; Tax Cuts and Jobs Act.

DOI: 10.1504/AJFA.2025.149904

American Journal of Finance and Accounting, 2025 Vol.8 No.4, pp.321 - 339

Received: 11 Dec 2024
Accepted: 31 Aug 2025
Published online: 17 Nov 2025 *

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