TRANSFER PRICING BY THE CANADIAN OIL INDUSTRY - A COMPANY ANALYSIS

The Canadian oil industry has been the subject of several debates with respect to charges of transfer pricing. On the basis of a large data set, which includes all oil shipments into the US and Canada from 1974 -84, the first direct test of manipulative transfer pricing, based on actual company behaviour, is performed. Particular attention is paid t o the multicollinearity problem which arises in this context. Through regression analysis it emerges that the six largest Canadian affiliate s of multinational corporations paid crude-oil import prices which wer e generally equal to or lower than prices of third-party transactions for a country in a given year. This is a fairly robust result which hi ghlights the existence of manipulative transfer pricing. In the presen t case, the practice was beneficial to Canada.