Sustainability in Public Finances Concerning Transfer Pricing in the EU

Abstract

Ensuring the sustainability of public finances is a crucial concern for the European Union, particularly in the context of transfer pricing, which is focused on tax base erosion and profit shifting. Transfer pricing, involving the internal transfer of goods, services, or intellectual property between related entities, can significantly impact member states' tax revenues and overall economic stability. Base erosion and profit shifting is a term used to describe tax planning strategies that multinational companies use to exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax jurisdictions, thereby reducing their overall tax liability. The scope of this study examines these two topics, mainly by using jurisprudential methods and analysis of scientific sources, as well as to research the effect of tax-based erosion and inequality among state jurisdictions. The assessment and analysis of the problems in these areas have been going on for years, and in essence, the neuralgic points are clear in terms of problem definition. Nevertheless, appropriate normative solutions have either not been developed to a full extent or are being implemented slowly. Considering the lengthy process of adopting normative rules, the main aim of this study is to make suggestions for the field of law enforcement and organs of public administration that could lead to changes in the areas of transfer-pricing, base erosion, and profit shifting. In conclusion, three key areas of action are proposed. Firstly, the promotion and everyday implementation of digital taxation contribute to the efficient exchange of data. Secondly, much closer cooperation between tax authorities on this basis can be strengthened at the Member State level in practical administration. Thirdly, the more effective safeguarding of the single market by national administrations.