Unmasking transfer pricing: how current international tax standards shift wealth from labor to capital

February 6, 1:15-2:45 PM | FES New York Office

Negotiations on the UN Framework Convention on International Tax Cooperation represent a critical opportunity to reassess long-standing features of the international tax system that have failed to keep pace with the realities of multinational business models. Central among these, transfer pricing rules have enabled large multinational enterprises to shift profits away from where economic activity, employment and value creation take place. As negotiations move into a more technical phase, discussions under Protocol I on the taxation of crossborder services will be particularly consequential. In August 2025, PSI, ITUC, the Network of Unions for Tax Justice and FES convened a first labor– UN dialogue in New York, attended by the Chair of the INC, Workstream co-chairs and a broad group of government representatives. That exchange highlighted a clear gap in the negotiation space: while transfer pricing is frequently treated as a technical or administrative matter, its concrete impacts on wages, investment decisions and corporate behavior are less well understood. 

This second dialogue built directly on that exchange.

Hosted by PSI, ITUC, NUTJ, and FES New York, the dialogue brought together UN delegates, tax experts, and labor representatives for an expert-led exchange on how transfer pricing rules operate in practice and influence economic outcomes. Through concrete company-level case studies, participants examined how multinational enterprises have applied transfer pricing rules in both residence and source jurisdictions, and considered the resulting impacts on wages, employment decisions, and investment patterns.

The discussion also explored new research on how corporate tax systems could function under unitary taxation with formulary apportionment. In doing so, it helped clarify the implications of transfer pricing–based approaches and created space for informed reflection among UNFCITC negotiators on alternative system design choices.