Conceptualizing the effects of corporate tax rate differentials on transfer pricing activities of FDI enterprises in Vietnam

of foreign direct investment enterprises. Liu, Li, Tim, and Guo (2017) have suggested that enterprises often have transfer 
mispricing to transfer the profits from a higher-taxed country to a lower-taxed country. They also assumed that transfer pricing 
manipulation for tax motivation is popular in countries with low-to-medium-level corporate tax rates. Nevertheless, the literature 
review showed the impact of corporate tax rate differential among countries on the transfer pricing activities of foreign direct 
investment enterprises. The main issue identified during the setting of this research with regards to the tax rate gap was the 
impact of tax rate gap among countries on transfer pricing activities in FDI enterprises. A few questions regarding respondents’ 
perception about whether tax rate gap between Vietnam and other countries is among priorities in investment decision of 
investors, Vietnam tax rate can change the company’s approach to TP activities, corporate income tax incentive affects TP 
activities, “tax haven” countries have an impact on TP activities of FDI enterprises, transfer pricing activities among related 
parties can help reduce total global tax liability. According to Table 8, there is an adequate relationship between the corporate 
Tax rate differential and Transfer pricing activities. It was further concluded that the regression weight for Transfer pricing 
activities in foreign direct investment enterprises is significant. Therefore, the hypothesis is proven valid. Table 8 describes the 
relationship between corporate Tax rate differential and Transfer pricing activities. Therefore, this study describes that corporate 
Tax rate differential has a significant favourable influence on transfer pricing activities of foreign direct investment enterprises 
in Vietnam. The above findings are supported by the findings of Liu, Li, Tim, and Guo (2017), Duong (2018), Nguyen and 
Duong (2018). It is concluded that the corporate Tax rate differential plays an essential role in transfer pricing activities of 
foreign direct investment enterprises. In this study, the respondents agree with the statement that the respondents agree that the 
corporate tax rate differential impact on transfer pricing activities in FDI enterprises. In term of Corporate tax rate differentials, 
it is concluded that the respondents agree with the statement that: the same corporate income tax among countries will minimize 
transfer pricing manipulation of enterprises; Vietnamese corporate income tax rate that the company has to pay annually is high 
for the company, and corporate income tax incentive has an effect on TP activities. Otherwise, they are neither agreeing nor 
disagreeing with the statements that transfer pricing activities among related parties can help reduce total global tax liability. 
This research also shows that the respondents agree with all the statement that transfer pricing activities are carried out to 
maximize the profits; transfer pricing matters are discussed in board meetings of FDI enterprises very frequently, and transfer 
pricing is often required by parent companies from foreign countries. The result gained from the research indicates that 
respondents are neither agreeing nor disagreeing with all the statements TP activities among related parties of FDI enterprise 
can increase global consistency of approach, and TP activities among associated partners are a method that FDI enterprises use 
Corporate Tax 
Rate Differentials 
Foreign direct 
investment enterprises 
Transfer Pricing 
Activities 
H. N. Nguyen et al. /Accounting 6 (2020) 299
to operate its business. The respondents agree with the statement that: the corporate tax rate of different countries affect the 
transfer pricing activities among these countries. 
6. Conclusions and Recommendations 
Transfer pricing has been getting its attention in many areas, especially in the field of tax and economics as enterprises expand 
their businesses across countries, where the gap in tax rates among these economies may arise. To partly contribute to a better 
understanding of TP, the research aims to identify the relationship between corporate tax rate differentials and TP activities of 
FDI enterprises in Vietnam. The theoretical and empirical review has been made related to the issues. From the literature review, 
the author has shown how transfer price and transfer pricing are defined in international and Vietnamese researches. The 
definition of foreign direct investment enterprises is also examined in the term of Organization for Economic and Cooperation 
Development and under the Investment Law of Vietnam. Also, from the literature review, the author sees that former researchers 
found the relationship between the corporate tax rate differentials among countries and the transfer pricing activities of the 
foreign direct investment enterprises. With the rising issue of transfer pricing in Vietnam, the author sees the need to continue 
study on TP, supplement and renew theory to catch up with globalization in the current context of TP management and control. 
The research methodology is examined in session three. Research onion is, and it requires the choices of research philosophy, 
research approach, research strategy, research method, time horizon, and data collection. After the discussions, the researcher 
applies positivism research philosophy and deductive research approach. Moreover, the survey is chosen as a research strategy 
and primary data, therefore, is collected from a self-administered questionnaire. The researcher relies on Survey Monkey, which 
is known as an online survey tool to implement the survey. Secondary data is also collected from published statistics and reports, 
and the role of this data is visible in literature. 150 respondents from FDI enterprises in Vietnam have given feedback on 
questionnaires. The empirical result shows that corporate tax rate differentials are found to have a strong relationship with 
transfer pricing activities of foreign direct investment enterprises. The author finds acceptable internal consistency reliability of 
the research, model testing, EFA analysis and hypothesis testing accepted with Hypothesis 1 and Hypothesis 2, which is similar 
to the literature review. Therefore, based on this result, the author suggests further research on the relationship between corporate 
tax rate differentials and transfer pricing activities of FDI enterprises in Vietnam to be conducted with the official survey of 379 
respondents as suggested in Methodology. With the above empirical analysis, the author recognizes the limitation of the study 
as the findings may be correct only for the sample, not for the whole population. However, further research in terms of the effect 
that corporate tax rate differentials pose on TP activities of FDI enterprises can be carried out upon this conceptual study 
framework. These further researches can give recommendations for better tax rate in Vietnam and can help much in suggesting 
a better solution to TP abuse. To further study the tax rate gap among Vietnam and other countries to have better solutions with 
transfer pricing manipulation. This suggestion was supported as the results of the findings in the study of Liu, Li, Tim, and Guo 
(2017) as they discovered in their study that transfer mispricing with tax motivation is popular in countries that are not tax 
havens and have low-to-medium-level corporate tax rates. With the above-chosen research methodology components, the 
researcher recognizes several limitations of the study. Firstly, the paper findings are based on limited sample size. Even the 
sample size is acceptable for academic studies provided by previous researchers; the author is aware of expected findings may 
be correct for this sample only and may not be correct for the whole population. Secondly, the limitation may come from the 
chosen self-administered questionnaire as this kind of survey’s weakness is that the answers of the respondents are not verified, 
and the respondents may provide the feedback that does not reflect their real thinking. 
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