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Abstract
How costly is transfer pricing (TP) regulation for firms? Drawing on administrative tax return and trade data linked with employment records, we estimate how multinational enterprises (MNEs) in Norway responded to an increase in TP documentation requirements. We analyze the monetary amount that MNEs spent on tax advisory services - both on external consultants and in-house lawyers and accountants - after the reform. Difference-in-differences event study designs show that the regulation significantly raised tax payments, reported profits, and spending on tax advisors. This includes a 25% increase in expenditures on external consultants and a 50% increase in expenditures on in-house advisors. Smaller MNEs bear a disproportionately large compliance and administrative burden, raising important considerations for the design and implementation of anti-tax avoidance measures.