Accounting for the missing billions

Abstract

This chapter considers, first, whether substantial transfer mispricing bymajor corporations that contributes to a loss of at least US$160 billion ayear to developing countries is plausible in the context of total likelycorporate profits earned worldwide in a year.1Second, it tests whether corporate activities in developing countriesand in the extractive industries in particular might be especially prone tothis abuse.Third, it considers whether this sum could be hidden from view within the accounts or financial statements of the multinational corporations(MNCs) that might be perpetrating the mispricing. Fourth, it explores the possibility that the MNCs might use secrecy jurisdictions to assist in hiding these transactions from view.In each case, it is suggested that the behavior described is plausible and that, as a consequence, losses of the estimated amount are also plausible,although not proven to exist as a result of this work.