The Divide: A Brief Guide to Global Inequality and its Solutions

by Jason Hickel

Transfer mispricing is remarkably easy. All a company has to do is write out an invoice that falsely reports the cost of an item, and then get their trade partner to write out a similarly false invoice on the other side – in other words, ‘same-invoice faking’. Analysts have recorded some flagrant examples of this: a kilogram of toilet paper from China priced at $4,121, a litre of apple juice from Israel priced at $2,052, ball-point pens from Trinidad priced at $8,500 each.18 By inflating transfer prices, a company can magically move its money from subsidiaries in high-tax countries to subsidiaries in low-tax countries – often in tax havens. Because this practice is so difficult to detect, no one knows the full scale of the problem. Global Financial Integrity estimates that it probably amounts to outflows that are at least equivalent to the scale of reinvoicing. That means another $879 billion flowing out of developing countries each year.19 And it may even be more than reinvoicing, given that transfer mispricing is so much easier to get away with. *