Tax Avoidance Strategies in Multinational Corporations: Investigating Transfer Pricing Manipulation, Profit Shifting, and the Use of Tax Havens

Abstract

This thesis examines how external auditors in Luxembourg balance commercial pressure with public-interest obligations when multinational groups pursue aggressive but legal tax planning. It focuses on four levers that determine the depth of tax-related audit work: (i) audit fees and budgeting, (ii) independence safeguards within one network brand, (iii) risk-based planning as a resourcing tool, and (iv) market behaviour, including audit shopping. Using eight semi-structured interviews with senior audit and transfer-pricing professionals (45–60 minutes, anonymised) and thematic analysis, the study looks upstream from the audit report to the planning and evidence that actually land in the file. Findings show, first, that budgets fund depth: specialist hours (economists, benchmarking, sensitivities, independent review) lead to visibly stronger testing; tight budgets push staged work, roll-forwards, or capped “absorbed” hours. Internal governance (EQCR/consultations) and reputational salience police any gap between “high risk” labels and procedures. Second, independence safeguards bite when operational refuse-by-default for dual roles, ring-fenced legacy situations (clean teams, restricted access, summary-only flows), independent reviewers, and network-level clearance—though these add cost and coordination. Third, risk-based planning provides the shared currency for negotiations: clear triggers (e.g., volatile ETR, new intercompany financing, DEMPE shifts) justify specialist involvement; stable indicators allow proportionate narrowing with evidence. Ethics re-enter through reputation and firm culture rather than abstract debate; where transparency is weak, teams escalate or walk away. The thesis contributes practical tools (a one-page Risk→Procedure map, trigger-based minimum floors, early network-level independence gating) and sketches a co-selection pilot to dampen lowballing and audit shopping. Limitations include a small, senior sample in a compact market; nonetheless, patterns are consistent and transferable to similar EU contexts.