INDEX OF REGULATORY-DIGITAL FRICTION IN TRANSFER PRICING: A JURISDICTION-SENSITIVE MODEL FOR CONSULTING DIGITALISATION
Abstract
The article proposes a jurisdiction-sensitive approach to assessing the socio-economic efficiency of digitalisation in transfer pricing consulting. Unlike studies that interpret digital solutions mainly as isolated automation tools, the paper argues that the effect of digitalisation depends not only on software functionality but also on the level of regulatory and institutional friction in the specific jurisdiction where a transfer pricing position is developed, documented or defended before the tax authority. The purpose of the paper is to develop and test the Index of Regulatory-Digital Friction in Transfer Pricing (IRDF-TP) and, on its basis, to construct a budget-neutral model for redistributing consultants' working time across jurisdictions, so that the architecture of the digital consulting process can be differentiated without increasing the total project budget. Methodology of research. The study combines analytical, comparative, index-based and applied calculation methods. The empirical base integrates OECD 2024 Mutual Agreement Procedure Statistics and the UN 2024 E-Government Development Index for ten European jurisdictions. Indicators are normalised via min-max transformation, and the composite index aggregates four weighted components: average time to close transfer pricing MAP cases, closure-ratio deficit, growth of unresolved case inventory and the digital government gap. A portfolio simulation with a uniform baseline of 120 hours per country tests budget neutrality. Findings. Hungary, Poland and Czechia form the cluster with the highest level of regulatory-digital friction; Spain, Austria and France occupy an intermediate position; Germany and the Netherlands demonstrate the lowest values. The simulation shows that adapting the consulting process to the real heterogeneity of the external environment requires reallocating only 6.75 percent of the total labour budget, with additional hours channelled primarily to high-friction countries. The scientific novelty lies in shifting the analysis from a tool-centred view of digitalisation to a process-and-institution-centred model of consulting design. Practical value. The IRDF-TP provides consulting firms with a transparent managerial instrument for three tasks: designing jurisdiction-specific depth of digital transfer pricing dossiers, differentiating the allocation of expert time between high- and low-friction countries, and justifying internal investments in digital tools by quantifiable external friction rather than by generic technology trends.
References
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OECD. OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022. Paris: OECD Publishing, 2022. DOI: https://doi.org/10.1787/0e655865-en
OECD. (2020). Tax Administration 3.0: The Digital Transformation of Tax Administration. Paris: OECD Publishing. DOI: https://doi.org/10.1787/ca274cc5-en
OECD. Tax Administration Digitalisation and Digital Transformation Initiatives. Paris: OECD Publishing, 2025. DOI: https://doi.org/10.1787/c076d776-en
OECD. (2015). Making Dispute Resolution Mechanisms More Effective, Action 14 – 2015 Final Report. Paris: OECD Publishing. DOI: https://doi.org/10.1787/9789264241633-en
Vial, G. (2019). Understanding digital transformation: A review and a research agenda. Journal of Strategic Information Systems, vol. 28, no. 2, pp. 118–144. DOI: https://doi.org/10.1016/j.jsis.2019.01.003
Matt, C., Hess, T., Benlian, A., Wiesböck, F. (2016). Options for Formulating a Digital Transformation Strategy. MIS Quarterly Executive, vol. 15, no. 2, pp. 123–139.
Warner, K.S.R., Wäger, M. (2019). Building dynamic capabilities for digital transformation: An ongoing process of strategic renewal. Long Range Planning, vol. 52, no. 3, pp. 326–349. DOI: https://doi.org/10.1016/j.lrp.2018.12.001
OECD. (2022) Tax Administration 3.0 and the Digital Identification of Taxpayers: Initial Findings. Paris: OECD Publishing. DOI: https://doi.org/10.1787/3ab1789a-en
OECD. (2022). Tax Administration 3.0 and Electronic Invoicing: Initial Findings. Paris: OECD Publishing. DOI: https://doi.org/10.1787/2ffc88ed-en
Kostovyat, H., Rogov, V. (2025). Transfer Pricing Management in the Context of Digitalization. Acta Globalis Humanitatis et Linguarum, vol. 2, no. 4, pp. 210–222. DOI: https://doi.org/ 10.69760/aghel.0250040010
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