Transfer pricing is a hidden internal practice within a multinational organisation and cannot as such be measured directly. It is not possible, therefore, to assess the impact, if any, of transfer pricing either on the merchandise trade balance or on the services trade balance presented in the CSO's balance of payments statistics. However, there are a number of factors which suggest that the practice of transfer pricing, to the extent that it exists, is declining in Ireland. First, the move from export sales relief to a 10 per cent rate of tax reduced the attraction of engaging in the practice and, second, most of the capital exporting countries have in recent years become more vigorous in their policing and detection of transfer pricing.
To the extent that transfer pricing may exist and impact on Ireland's international trade balance, its effect is essentially removed in the current account of the balance of payments through the repatriation of profits, as well as royalty, dividend and interest outflows.
Indications from the annual Census of Industrial Production are that 70 per cent-80 per cent of manufactured exports are accounted for by foreign-owned companies.