Country-by-Country Reporting: A study on how Swedish MNEs prepare for the new transfer pricing documentation requirement

Abstract: This paper employs a hybrid methodological approach to study the impact of the steps taken to comply with the new transfer pricing documentation requirement, Country-by-Country (CbC) reporting, on the management control system (MCS) in a Swedish multinational enterprise (MNE). Based on the empirical case study findings and the results from the industry survey, we find that there are inconsistencies between how transfer pricing policies are developed according to the arm's length principle (ALP) and how the outcome from those policies are documented in the common CbC report model template developed by the OECD. Our analysis shows that the inconsistencies create a multidimensional, time-ordered sequence effect on the components of our case company's MCS. We argue that the common CbC report model template creates uncertainty and unpredictability for MNEs, which are compensated through preparation of prevention mechanisms for the benefit of stakeholder management.