Danubius International Conferences, 1st International Conference on Education in the Digital Era

Transfer Prices - Tax Evasion or Optimization

Alin Sergiu Nitu, Aurelian Constantin, Marcel Constantin
Last modified: 2022-07-15


In the context of globalization, a topical issue at international level, which is also found in Romania, is the fiscal nature of transfer pricing specific in principle to multinationals, which by definition "represents the values ​​at which transactions between companies are carried out at international level. group” [i].

The practical approach in view of the fiscal nature of these prices, generated discussions and implicitly diverse opinions in society, from the point of view of many financial analysts, these prices representing a disguised form of tax evasion, with the help of accounting, which generates financial performance of multinational companies. , mainly of the parent companies,.

Naturally, there are also justifying opinions presenting this aspect as fiscal optimization, through which the companies try to obtain the maximum possible legal profit by manipulating these prices, using the legislative gaps specific to each state.

In order to solve this problem in a unified way, the OECD approach is based on the arm's length principle[ii], which assumes that transactions between affiliates must take place as if they were practiced between unknown independent persons.

What is important to analyze is that states are heterogeneous in terms of taxation, the application of this principle being interpreted and legislated differently, a situation that creates international uncertainty either by double taxation or non-taxation of transactions, a weakness that favors multinationals.

This evasionist aspect was very plastically highlighted by Gabriel Zucman considering that “Private wealth is far superior to public debt. And, contrary to popular belief, these riches can be taxed. Profits go to Bermuda, but factories do not. The money is hidden in Switzerland, but is not invested here. Capital is not mobile, it can be disguised. Europe is stealing itself"[iii].

In Romania, the transactions that fall under the incidence of transfer pricing are very varied and multiple and cover all economic sectors, but in terms of its interpretability through the phrase tax evasion or optimization, they are performed in principle by two methods, both apparently reflected correctly in the accounting, as follows:

• distortion of transfer prices depending on the interest of the transaction: the purchase of goods from affiliates at increased prices, the purchase of services (management fee) or the sale of goods to affiliates at reduced prices.

• granting loans to Romanian companies at high interest rates, through which the transfer of profit to the lender is made.

Without denying the importance of multinational companies in the development of Romania, in order to create a fair competitive framework, the accounting and tax legislation regulated in a certain way the registration, reporting and control of prices in multinational companies and sanctioning any slippage from acceptable limits.


[ii]The principle of full competition is enshrined in Article 9 of the Model Tax Convention of the Organization for Economic Co-operation and Development (OECD). The OECD has also developed the “Guide to Transfer Pricing for Multinational Companies and Tax Administrations”;

[iii]G. Zucman, The Hidden Wealth of Nations -Investigation on tax havens, Litera Publishing House 2016, p. 116.