Unmasking Transfer Pricing Manipulation in Zambia’s Copper Mining Sector: An Analysis of Schemes, Legal Gaps, and Enforcement Challenges under the Arm’s Length Principle

Abstract

This article interrogates the pervasive use of transfer pricing manipulation (TPM) schemes by multinational enterprises (MNEs) operating in Zambia’s copper mining industry, examining the legal, institutional, and economic ramifications of such practices. Anchored in the arm’s length principle as articulated under the OECD and UN Model Conventions, the analysis unpacks the multifaceted mechanisms through which MNEs circumvent tax obligations via mispricing of goods, services, and intangibles. Using doctrinal and socio-legal methods, the study classifies TPM schemes into strategic misinvoicing, debt manipulation, service misallocation, and intellectual property distortions. It argues that Zambia’s domestic regulatory framework is undermined by legislative ambiguity, enforcement deficits, and institutional capture, thereby facilitating profit shifting and erosion of the country’s tax base. In concluding, the article recommends a recalibration of Zambia’s legal architecture to align with best international practices, calling for the implementation of country-by-country reporting, mandatory disclosure rules, and the development of local capacity to challenge complex TPM arrangements.