Transfer Mispricing As an Argument for Corporate Social Responsibility

This article presents a case for transfer mispricing as an argument for Corporate Social Responsibility (CSR). The argument builds on the position that in order to compensate for potential loss of brand image and reputation, Multinational Companies (MNCs) would be more socially responsible when they are operating in countries where the legislation and laws in place are not effective at identifying and sanctioning transfer mispricing. We first discuss the dark side of transfer pricing (TP), next we present the nexus between TP and poverty and finally we advance arguments for CSR in transfer mispricing. While acknowledging that TP is a legal accounting practice, we argue that in view of its poverty and underdevelopment externalities, the practice per se should be a solid justification for CSR because it is also associated with schemes that deprive developing countries of capital essential for investments in health, education and development programmes. Therefore CSR owing to TP cannot be limited to a strategic management approach, but should also be considered as some kind of social justice because of associated transfer mispricing practices. We further argue that, CSR by multinational corporations could incite domestic companies to comply more willingly with their tax obligations and/or engage in similar activities. Whereas, traditional advocates of CSR have employed concepts such as reputation, licence-to-operate, sustainability, moral obligation and innovation to make the case for CSR, the present inquiry extends this stream of literature by arguing that TP and its externalities are genuine justifications for CSR. We consolidate our arguments with a case study of Glencore and the mining industry in the Democratic Republic of Congo

On the Empirics of Institutions and Quality of Growth: Evidence for Developing Countries

We explore a newly available dataset on quality of growth to investigate the effect of institutions on growth quality in 93 developing countries for the period 1990 to 2011. Quality of institutions is measured in term of political risk. The empirical evidence is based on: (i) Ordinary Least Squares (OLS) and Two Stage Least Squares (2SLS) and (ii) cross-sectional and panel data structures. In order to avail room for more policy implications, the dataset is further disaggregated into income levels, namely: Lower middle income (LMIC), low income (LI) and upper middle income (UMIC). Three main findings are established. First, institutions are positively related to the quality of growth. Second, institutions have significantly contributed to growth quality in increasing order during the following time intervals: 2005-2011, 1995-1999 and 2000-2004. Third, the positive nexus between institutions and growth quality is fundamentally driven by LMIC. Policy implications are discussed