International transfer pricing and income shifting: evidence from the UK

P. B. Oyelere, C. R. Emmanuel

Research output: Contribution to journalArticlepeer-review

25 Citations (Scopus)


The potential use of international transfer pricing (ITP) as an income-shifting mechanism by multinational enterprises (MNEs) has long been recognized. However, there is relatively little evidence to substantiate or discount this claim in relation to UK-based foreign-controlled enterprises (FCEs). This paper examines the possible use of ITP as an income-shifting mechanism by FCEs operating in the UK. The methodological approach involves the comparison of the profitability (performance) and dividend (post-performance) distributions of a sample of FCEs with those of UK-controlled enterprises (UKCEs) over a two-year period. The two samples are matched on the basis of their total assets (capability). Results reveal significant differences in the profitability and dividend distributions of the two groups. FCEs underperform UKCEs, but their level of dividend distribution outstrips those of UKCEs. Based on this sample of seventy-two companies, a firm is more likely to be an FCE, rather than a UKCE, if it reports a combination of lower performance and higher post-performance distribution. Evidence of significant income shifting by FCEs is confirmed and the claim that ITP is the key mechanism for such shifts cannot be dismissed.

Original languageEnglish
Pages (from-to)623-635
Number of pages13
JournalEuropean Accounting Review
Issue number4
Publication statusPublished - Dec 1 1998
Externally publishedYes

ASJC Scopus subject areas

  • Business and International Management
  • Accounting
  • Business, Management and Accounting (miscellaneous)
  • Automotive Engineering
  • History
  • Aerospace Engineering
  • Engineering (miscellaneous)
  • Economics, Econometrics and Finance (miscellaneous)


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