EXAMINING THE INFLUENCE OF TRANSFER PRICING REGULATIONS ON TAX REPORTING PRACTICES AND FINANCIAL ACCOUNTABILITY OF MULTINATIONAL COMPANIES IN DEVELOPING COUNTRIES

Abstract

This study examines the influence of transfer pricing regulations on tax reporting practices and financial accountability of multinational corporations (MNCs) in developing countries. Transfer pricing, which governs the pricing of intercompany transactions, plays a crucial role in ensuring fair tax distribution and financial transparency. However, the enforcement of these regulations is often challenging in developing economies due to limited institutional capacity, insufficient resources, and political instability. A qualitative literature review was conducted to explore how transfer pricing regulations impact tax compliance, financial accountability, and institutional enforcement. The findings reveal that while transfer pricing regulations are effective in improving tax compliance when properly enforced, weak enforcement mechanisms in developing countries hinder their full potential. Financial accountability is often compromised by the manipulation of transfer prices, which distorts financial statements and undermines market transparency. Institutional capacity, including the training and resources of tax authorities, is a critical factor in ensuring effective enforcement. This study suggests that enhancing institutional capacity, adapting international guidelines to local contexts, and fostering greater international cooperation can improve the enforcement of transfer pricing regulations. The implications of these findings offer valuable insights for policymakers and tax authorities seeking to strengthen tax systems and improve financial transparency in developing countries.