THE ROLE OF TRANSFER PRICING LEGISLATION IN MITIGATING BASE EROSION AND PROFIT SHIFTING IN DEVELOPING COUNTRIES WITH A SPECIFIC FOCUS ON ZIMBABWE
DOI:
https://doi.org/10.24193/subbnegotia.2025.1.04Keywords:
Base Erosion, Profit Shifting, Transfer Pricing, Regulations, ZimbabweAbstract
Article History: Received: 9 December 2024; Reviewed: 18 February 2025;
Accepted: 12 March 2025; Available online: 26 March 2025.
In today’s interconnected global economy, transfer pricing has emerged as a critical issue for governments worldwide. Tax authorities are particularly concerned about its potential for profit shifting to low-tax jurisdictions, which can significantly reduce overall tax liabilities. This study investigates the role of transfer pricing regulations in mitigating base erosion and profit shifting in Zimbabwe. Utilizing a qualitative systematic review method, the research provides insights into the current state of transfer pricing regulations in Zimbabwe and offers recommendations to enhance their effectiveness. The study also addresses the challenges faced by tax authorities in enforcing these regulations and proposes policy recommendations to improve compliance and effectiveness. The findings indicate that robust transfer pricing regulations can significantly reduce base erosion and profit shifting. The study recommends the implementation of Advanced Pricing Arrangements (APAs), safe harbors, materiality thresholds, and training programs for Zimbabwe Revenue Authority (ZIMRA) G3 Officials to strengthen the effectiveness of transfer pricing regulations in Zimbabwe.
JEL classification: G3, H2, H3
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