In a globalized economy where intra-group transactions provide opportunities for tax planning, developing countries need to protect their respective tax bases. The author outlines the motivations for international profit shifting through transfer pricing manipulation and makes the case for developing countries to establish and enforce transfer pricing rules to protect their tax bases. He then considers measures to counter transfer pricing manipulation and critically examines the arm's length principle. The article then explains the transfer pricing methods, and concludes with an examination of why the transactional net margin method is a widely used method.