How Profit Shifting Through Transfer Pricing Affects Global Efforts to End Poverty

Makassar, Indonesia Juny 30 2025/ CORGOV/- In today’s interconnected world, the way multinational corporations manage their profits can have far-reaching effects beyond just business and economics. One critical issue is profit shifting through transfer pricing, a practice where companies move profits from high-tax countries to low-tax jurisdictions to reduce their overall tax burden. This practice, while legal in some cases, raises concerns about corporate tax aggressiveness and its broader impact on society.

A recent article titled “Profit Shifting Through Transfer Pricing: A Systematic Review on Its Influence on Corporate Tax Aggressiveness,” published in the JAFM: Journal of Accounting and Finance Management on June 30, 2025, by Yayasan Dharma Indonesia Tercinta (DINASTI) and Universitas Winaya Mukti (UNWIM) Bandung, sheds light on this complex issue. The article systematically reviews how transfer pricing strategies contribute to aggressive tax avoidance by corporations.

Why does this matter to the general public? When corporations aggressively shift profits to avoid paying their fair share of taxes, governments face significant revenue losses. This reduction in tax income limits the funds available for essential public services such as healthcare, education, and social welfare programs. These services are crucial for lifting people out of poverty, which directly relates to Sustainable Development Goal (SDG) 1: No Poverty.

Tax revenues are a foundation for governments to invest in poverty alleviation initiatives. When these revenues shrink due to profit shifting, the burden often falls on ordinary citizens through higher taxes or reduced public services. This undermines efforts to create equitable economic growth and social protection systems that can help vulnerable populations.

Moreover, the article highlights that transfer pricing is not just a technical accounting issue but a significant factor influencing global economic inequality. By understanding and addressing corporate tax aggressiveness, policymakers can strengthen tax systems to ensure fair contributions from all sectors. This will help secure the financial resources needed to achieve SDG 1 and other related goals such as quality education (SDG 4) and good health and well-being (SDG 3).

In conclusion, tackling profit shifting through transfer pricing is essential not only for fair taxation but also for supporting sustainable development worldwide. The insights from the article published by DINASTI and UNWIM remind us that corporate financial practices have a direct impact on society’s well-being. By promoting transparency and accountability in corporate tax behavior, we can move closer to a world free from poverty and inequality.