Research notes · Finance

Do firms shade the prices on their own invoices to move profit across a border?

What the authors found

Cristea and Nguyen use Danish export transactions from 1999 to 2006, identifying from the moment a firm acquires a foreign affiliate and from changes in statutory tax rates. Danish multinationals reduce the unit values of exports to low-tax countries by 5.7 to 9.1 per cent relative to comparable arm's length sales — a discount that has no commercial explanation and corresponds to a tax revenue loss of about 3.24 per cent of these firms' tax.

What our data adds

This is the note where the mismatch between the question and our data is sharpest, and it is worth being explicit about why. The paper's evidence is a unit value: a price per kilogram on a specific shipment to a specific affiliate. Our trade data records values in dollars with no quantities attached, so no unit value can be computed from it at all. A 5.7 per cent shading of prices is entirely invisible in a series that only records the total.

What this cannot show

Adding quantities would not fix it either. Detecting transfer mispricing needs the ownership link between exporter and importer — whether this shipment went to an affiliate or to an unrelated buyer — which is firm-level information no trade statistic carries. GLEIF corporate ownership records are noted in this platform's source register as the missing piece, and they are not loaded.

The data behind it

Related notes

• If a firm books a sale in a tax haven while the goods are sold somewhere else, what does that look like in the statistics?
• What happens to a country's creditworthiness when some of its debts are secret?
• If profits are booked in the wrong country, which national statistics are wrong?

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