As an alternate hypothetical, lets imagine that every multinational happens to be related to a large number of subsidiaries in the Cayman Islands, Bermuda, Singapore, and Luxembourg. Furthermore, suppose that three quarters of all world-wide corporate profits happen to be booked in these four countries with a minuscule population. Clearly there would be a problem.

So long as there is "greyness" in the allocation of profits among related entities, this will be systematically exploited to maximally shift profit low tax jurisdictions.

Although transfer pricing is a significant component, it is not the only one.

The most obnoxious methods probably relate to hybrid mismatches where corporations exploit differences in two tax codes to take deductions in both countries. This may involve a payment that is treated as interest in one country and a dividend in the other. It may involve an entity that is treated like a flow-through partnership in one country and a corporation in the other.

There is also "treaty shopping" where corporations set up faux corporations in countries with favourable bilateral treaties so they may reduce their tax when shifting profits from country A to the intermediary to country B.