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Transfer Pricing - between Optimization and International Tax Evasion

Author

Listed:
  • Valentin SAVA

    (Dunarea de Jos University of Galati, Romania)

  • Manuela Violeta TUREATCA

    (The Romanian Academy, INCE Kiritescu, Bucharest, Romania)

Abstract

Each enterprise in the private sector aims to increase financial return, which is achieved by obtaining a the higher net profit by increasing revenue and reducing expenditure. In this endeavor, compliance with tax obligations occupy a very important role because handling taxes may lead to an increase in revenue and / or a reduction of spending, and this action is called tax optimization. In the case of multinational companies, the main tool that can be used to lower the tax burden and increasing, sometimes in sizeable benefits in net, is the transfer prices or the prices they registered entities in the group transactions between them, along with another instrument with great impact, ie tax havens. Tax evasion, designating evading payment obligations of a company according to the national tax system, may be legal in the sense that tax optimization does not violate the rules, but exploiting loopholes that are in them. But when legal tax rules are violated, we deal with tax fraud, which will be subject to punitive measures by public authorities as it affects the whole population.

Suggested Citation

  • Valentin SAVA & Manuela Violeta TUREATCA, 2017. "Transfer Pricing - between Optimization and International Tax Evasion," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 605-617.
  • Handle: RePEc:ddj:fserec:y:2017:p:605-617
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    References listed on IDEAS

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    1. Cosimo Beverelli & Gianluca Orefice & Nadia Rocha, 2016. "The Impact of Offshoring and Migration Policies on Migration Flows," Working Papers 2016-21, CEPII research center.
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