Enhancing the Effectiveness of Transfer Pricing Regulation Enforcement in Reducing Base Erosion and Profit Shifting in African Countries. A Scoping Review

Abstract

Purpose: This study was motivated by the fact that despite several recommendations being proffered by researchers, some of these noble suggestions just remain in paper.Furthermore, the problem of transfer pricing (TP) manipulation is more detrimental to the African continent as well as the fact that it is far from being addressed.Through a scoping review, this study sought to synthesise research evidence on the possible solutions to minimise transfer pricing manipulation in African countries through categorisation of these recommendations into key themes.Methodology: This study employed a qualitative research approach through a scoping review.Through a comprehensive review of literature, the nature and extent of the possible solutions to curbing illicit financial flows through transfer pricing was identified, assessed and evaluated for applicability.Considering that transfer pricing is a hot topic and legislation is still in its infancy in African countries, database searches were done through Google scholar for both peer reviewed articles and grey literature.Findings: The findings revealed that solutions can be grouped into three categories, which include politically oriented, legislative focused and administrative recommendations.It was evident that there is need for political commitment by governments, improvements to the current legislation as well as enhanced administrative capacities of revenue authorities in order to reduce TP abuse.Originality or Value: Transfer pricing manipulation in international trade is a challenge in most developing economies.Transfer pricing and tax evasion are important and topical concerns as they relate to base erosion and profit shifting in developing countries.This is linked to the fact that ethical practices, corruption, illicit financial flows and other similar concepts speak to Sustainable Development Goal 16 (peace, justice and strong institutions).In response to challenges of transfer pricing and the need to ensure maximum revenue mobilisation, developing countries have put in place transfer pricing legislation to regulate transfer pricing activities and to reduce the tax revenue losses resulting from transfer pricing manipulation by multinational enterprises.Several studies have been carried out in African countries to investigate the transfer pricing exploitation strategies, assess the effectiveness of transfer pricing legislation in curbing Base Erosion and Profit Shifting.This study sought to provide an aggregated synopsis of recommendations on how to enhance legislation and effectiveness of the regulation, with the hope that this summary would provide policymakers with a one-stop shop for possible solutions as well as evaluating their applicability.

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