The use of information technology for international transfer pricing in multinational enterprises

Abstract

This paper studies the degree to which multinational enterprises (MNEs) use information technology for managing international transfer pricing (ITP). Based on 21 interviews conducted with in-house accounting and tax professionals in MNEs, we observed limited use of information technology for ITP management. However, some degree of ITP automation was observed in workflow management to produce transfer pricing documentation. The limited degree of automation observed was driven by both system- and individual-level barriers. Overall, we found that management accountants and information technology experts dominate the enterprise resource planning system design agenda, and the tax departments’ ITP tax compliance objective plays a relatively limited role. This reduces the ability for ITP automation partly because the data segmentation that is prioritized for management reporting does not support the tax departments’ needs for legal-entity data segmentation to document tax compliance.