On the Elusive Implications of Group Synergies for Transfer Pricing: The Elephant in the Room

In this article, the authors investigate whether and how group synergies at the cost level impact conventional transfer pricing methods. They find that the cost-plus method and the TNMM may not lead to appropriate outcomes when group synergies are not accounted for by comparability adjustments. The authors also show how comparability adjustments can be performed and provide some ideas on how to quantify certain types of synergies in practice.