Category of Market Price in Modern Tax Law

2016 ◽  
Vol 4 (7) ◽  
pp. 0-0
Author(s):  
Инна Хаванова ◽  
Inna Khavanova
Keyword(s):  
Transfer Pricing ◽  
Action Plan ◽  
Market Price ◽  
Profit Shifting ◽  
Complex Issue ◽  
Regulatory Changes ◽  
Pricing Rules ◽  
Arm’S Length Principle ◽  
The Difference ◽  
Correct Application

The article is devoted to transfer pricing rules with particular reference to unresolved problems. Its purpose is to outline the complex issue of transfer pricing. The author examines the difference between the concepts of “market price” and price, determined according to the “arm’s length principle”, discusses the basic rules of taxation, principles of determining the price of goods, work or services for taxation purposes. To ensure the correct application of the separate entity approach, countries have adopted the arm´s length principle. This article analyzes initiatives on taxation in the area of corporate taxation (OECD Action Plan on Base Erosion and Profit Shifting (BEPS), Final Reports “Aligning Transfer Pricing Outcomes with Value Creation”). The author points out that the level of control (direct or indirect) in determining interdependence between persons, has its own specific features in different states. The reason behind it is that the problem of transfer pricing does not always arise, but only when subjects establish specific relations. The article characterizes the regulatory changes and developments in Russia.

Challenges of Monitoring Tax Compliance by Multinational Firms: Evidence from Chile

2019 ◽  
Vol 109 ◽  
pp. 500-505
Author(s):  
Sebastián Bustos ◽  
Dina Pomeranz ◽  
José Vila-Belda ◽  
Gabriel Zucman
Keyword(s):  
Multinational Firms ◽  
Transfer Pricing ◽  
Tax Avoidance ◽  
Tax Compliance ◽  
Tax Rates ◽  
Profit Shifting ◽  
Effective Tax Rates ◽  
Arm’S Length Principle ◽  
Debt Shifting

This paper reviews common challenges of taxing multinational firms, using Chile as a case study. We briefly describe key international tax avoidance methods: profit shifting to low-tax jurisdictions through transfer pricing and debt shifting. We discuss the prevalent policy to tax multinationals--the arm's length principle--and alternative proposals using apportionment formulas. Novel data from Chile show that multinationals make up a large share of GDP but report lower profit and effective tax rates than local firms. In 2011, Chile implemented a reform following OECD guidelines to enforce the arm's length principle. We discuss potential effects on tax collection and welfare.

scholarly journals TAX MORALITY: EXAMINING THE BEPS DEBATE, WORK OF THE OECD AND ITS IMPACT ON AFRICA

2017 ◽  
Author(s):  
Daniel Godson Olika
Keyword(s):  
Multinational Corporations ◽  
Transfer Pricing ◽  
Tax Rates ◽  
Profit Shifting ◽  
The Public ◽  
Pricing Rules ◽  
Planning Strategies ◽  
International Tax ◽  
Harsh Criticism ◽  
The Impact

International tax issues have never been at the forefront of international politics as they are today. This is due in large part to the realization that the current international tax system in existence allows multinational corporations to plan their taxes in such a way that they will be able to pay little or no taxes at all. They are able to do this through certain loopholes and gaps that currently exist in the system. These loopholes and gaps are seen as creating opportunities for taxpayers who are involved in cross-border activities to aggressively structure their activities to mitigate potential tax exposure or achieve no tax liabilities. They do this by exploiting; the hybrid-mismatch arrangements, shortcomings of the transfer pricing rules in jurisdictions where they operate and shifting profits from countries where their profits are made to countries with low tax rates. Consequently, some multinationals pay as little as five percent in corporate taxes, even as smaller domestic businesses pay up to 30 percent. The result of this activity is what is known as; base erosion and profit-shifting (BEPS) and it has the potential to deprive all countries of significant tax revenues. This rave debate and harsh criticism from the public influenced the intervention of the Organisation for Economic Co-operation and Development (OECD) to start its now famous BEPS Project. The OECD BEPS Project aims to provide governments or tax administrators with clear international solutions for fighting aggressive corporate tax planning strategies that artificially shift profits to locations where they are subjected to more favourable tax treatment. This paper shall address the various strands of the BEPS debate, the OECD BEPS project, the impact of the project in Africa and Nigeria. The next section shall address the various strands of the debate.

scholarly journals Transfer pricing rules in EU member states

2010 ◽  
Vol 58 (3) ◽  
pp. 243-250 ◽  
Author(s):  
Veronika Solilová
Keyword(s):  
Free Market ◽  
Transfer Pricing ◽  
Transfer Price ◽  
Market Conditions ◽  
Member States ◽  
Tax Havens ◽  
Eu Member States ◽  
Pricing Rules ◽  
Arm’S Length Principle ◽  
Accepted Standard

One of the important area of international taxes is transfer pricing. Transfer price is a price set by a taxpayer when selling to, buying from, or sharing resources with a related (associated) person. The tran­sac­tions between these persons should be assessed at their arm’s length price in according the arm’s length principle – international accepted standard – as the price which would have been agreed between unrelated parties in free market conditions. This paper is focused on the tranfer pricing rules used in particular EU Member States so as if EU Member States apply the arm’s length principle, define the related persons, apply recommendations of the OECD Guidelines, use the transfer pricing methods, require TP Documentation, exercise specific transfer pricing audit or impose specific penalties and apply APAs. Transfer pricing rules should prevent taxpayers from shifting income to related person organized in tax havens or in countries where they enjoy some special tax benefit.

scholarly journals Taking More than They Give: MNE Tax Privateering and Apple's “Ocean” Income

2018 ◽  
Vol 19 (4) ◽  
pp. 693-726
Author(s):  
Robin F. Hansen
Keyword(s):  
Action Plan ◽  
Multinational Enterprise ◽  
State Aid ◽  
The Self ◽  
The European Union ◽  
Profit Shifting ◽  
Complex State ◽  
Arm’S Length Principle ◽  
Self Interest ◽  
Face Complex

Following a three-year investigation, on August 30, 2016, the European Commission (EC) released its decision in the Ireland-Apple State aid case. The EC found that Ireland had breached the Treaty on the Functioning of the European Union because the manner in which Ireland had determined the tax payable by two Apple subsidiaries was not consistent with the arm's length principle and/or it was not based on objective criteria. This meant that Ireland had selectively favored Apple and provided the firm with State aid. The EC decision provides an example of how aggressive multinational enterprise (MNE) tax minimization is anti-competitive. The Ireland-Apple case also provides an illustration of how a lack of transparency and incoherency in MNE definition contribute to aggressive MNE tax minimization. States' reactions to the EC decision are further telling because they show how MNE tax minimization engages the self-interest of States. This suggests that efforts to combat aggressive MNE tax minimization, such as the OECD's Base Erosion and Profit-Shifting Action Plan, face complex State motivations in effecting change on the international level. Profit haven States have the most to lose if MNE tax minimization is effectively addressed. In addition, MNE home States may be at times loath to support changes to the system which favors “their” MNEs at the expense of other States' tax revenues. It is as if some home States view MNEs as their privateers, with such MNEs operating internationally under the tacit approval of their home States to aggressively avoid paying taxes to other countries. Home State leadership may be mistaken in thinking that MNE tax minimization is in their favor because MNEs are largely free agents and aggressive MNE tax minimization is dearly costing nearly all states.

scholarly journals The Main Stages of Normative Regulation of Financial Control Over Transfer Pricing in Ukraine

2021 ◽  
Vol 4 (519) ◽  
pp. 196-204
Author(s):  
M. O. Kuzheliev ◽  
◽  
I. M. Syvolap ◽  
Keyword(s):  
Transfer Pricing ◽  
National Level ◽  
Financial Control ◽  
National Legislation ◽  
Tax Legislation ◽  
Pricing Rules ◽  
Arm’S Length Principle ◽  
Constant Change ◽  
Business Entities ◽  
Stage 1

Any activity is carried out in accordance with what laws and regulations are interpreted at the national level, and often with the direct consent o n the part of the State authorities. In Ukraine, the process of forming the normative regulation for control over transfer pricing is still underway, but conceptually it is already possible to define four main stages. Stage 1 (zero stage): 2010–2013 – in the national legislation were no definitions of controlled operations and transfer pricing, but the concept of ordinary price was widely used, and the tax legislation began to distinguish the methods for its determination and the procedure for application). Stage 2 (baseline stage): 2013–2014 – a significant transformation of tax legislation took place – transfer pricing was introduced in Ukraine. Stage 3 (crucial stage): 2015–2019 – the «arm’s length principle» was introduced, which was wider than the concept of «ordinary price», and relations between business entities were now evaluated not only at the price of transactions performed, but under the conditions of such operations. Stage 4 (renewal stage): 2020–2021 – transfer pricing rules were updated: new concepts were introduced into the national legislation – international group of companies, the group’s parent company, authorized participant; a three-level transfer pricing reporting model was implemented. Thus, Ukraine undergoes a constant change of national legislation, in particular in the normative regulation of financial control over transfer pricing, which for 10 years has been transformed from control over ordinary prices in the country to control over transactions of international groups of companies whose participants are residents of Ukraine.

scholarly journals Profit shifting in Brazil and the impact of tax havens

2021 ◽  
Vol 32 (85) ◽  
pp. 95-108
Author(s):  
Alex A. T. Rathke
Keyword(s):  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Profit Maximization ◽  
Profit Shifting ◽  
Tax Havens ◽  
Tax Rate ◽  
Pricing Rules ◽  
Robust Least Squares ◽  
High Level ◽  
The Impact

ABSTRACT We investigate tax-induced profit shifting in Brazil and the impact of tax havens on the shifting behavior of firms. Profit shifting research in Brazil is virtually non-existent, although the shifting incentives in Brazil are prominent. Our research fills this gap with evidences in the novel Brazilian context. Profit shifting is a tax-minimization strategy where multinational enterprises perform intra-firm transactions to allocate taxable profits to low-tax locations. Brazil combines a remarking set of profit shifting incentives, especially a high corporate tax rate, extremely complex tax system, and distinguished transfer pricing rules. Further researches may leverage from the shifting incentives in Brazil, since it provides opportunities to investigate additional factors that affect the shifting behavior of firms. We analyze 989 transaction-by-country observations for the period of 2010-2017. Baseline analysis follows the robust least squares approach with controlling covariates. Linear estimate model derives from the conventional Cobb-Douglas production function, to analyze the impact of shifting incentives on profit maximization. We find that Brazilian firms have a high level of intra-firm transactions with related parties located in low-tax countries, especially with tax havens. It represents a strong evidence of profit shifting behavior in Brazilian firms.

Partisanship, Tax Policy, and Corporate Profit-Shifting in a Globalized World Economy

2017 ◽  
Vol 50 (14) ◽  
pp. 1998-2026 ◽  
Author(s):  
Mi Jeong Shin
Keyword(s):  
Tax Policy ◽  
Multinational Firms ◽  
Transfer Pricing ◽  
Tax Rates ◽  
Growth Data ◽  
Profit Shifting ◽  
Effective Tax Rates ◽  
The Difference ◽  
Globalized World ◽  
The Impact

Political science scholarship has found mixed evidence on the impact of partisanship on the taxation of firms. In this article, I show that although left-leaning governments set tax rates at higher levels than right-leaning governments, the difference in the effective tax rates paid by firms is much less dramatic between left and right governments. I argue that left-leaning governments maintain high tax rates, a visible policy their constituency supports, while allowing firms to transfer profits abroad to minimize their tax burden (transfer pricing). Constituency costs hinder them from cutting tax rates to avoid backlash from voters, but they impose fewer restrictions on profit-shifting to attract investment by multinational firms for economic growth. Data covering 19 advanced economies between 2006 and 2009 support my theoretical expectation. My analyses suggest that the effect of government partisanship on corporate tax policy can be ambiguous when political parties consider various policy tools.

scholarly journals INTERNATIONAL BUSINESS IN UKRAINE: TAX COMPONENT

2021 ◽  
pp. 46-49
Author(s):  
Ірина Береза ◽  
Володимир Соколенко
Keyword(s):  
International Business ◽  
Transfer Pricing ◽  
Action Plan ◽  
Market Mechanism ◽  
Tax Legislation ◽  
Pricing Rules ◽  
Economic Interaction ◽  
Effective Level ◽  
National Tax ◽  
Thin Capitalization

In the system of regulation of international business, the tax component is of exceptional importance. The development of business is largely dependent on tax policy tools, the actual task of which is to create an optimal tax field in Ukraine, for the development of an open national economic system. The article is devoted to the study of theoretical and practical tax aspects in the international business of Ukraine. Effective level and taxation regime helps to attract foreign capital, develop international business, increase state revenues and increase gross domestic product of the country. The factors hindering the process of investing in our country are considered. The problems, as well as ways of their solution, concerning the tax component of Ukrainian business are analyzed. Detailed attention is focused on some tax aspects, which primarily include: transfer pricing rules, the rule of "thin capitalization", the rules of reporting of international groups of companies by country. Essential characteristics, features and rules of transfer pricing and "thin capitalization" are highlighted. The actions on the BEPS Action Plan are considered, which propose to eliminate the shortcomings of international tax regulation and differences in the national tax legislation of different countries, which promote "concealment" of corporate profits and its artificial transfer to low tax jurisdictions, where companies are no longer engaged in economic activity. The proposals on the improvement of bills that will recognize Ukraine as a cooperating country on taxation issues have been formed. These bills will make it possible to strengthen the economic link between Ukraine and the countries of the CIS and Eastern Europe. Recovering and strengthening these ties is the easiest to date, as each party feels that need. Right now Ukraine is taking measures for their restoration on the basis of an effective market mechanism of economic interaction.

scholarly journals The Harmonisation of Transfer Pricing: the Obstacles, the Arm's Length Principle and the OECD Guidelines

2021 ◽  
Author(s):  
◽  
Duran Timms
Keyword(s):  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Legal Obligation ◽  
Fair Share ◽  
Pricing Rules ◽  
Arm’S Length Principle ◽  
Significant Obstacle ◽  
Domestic Law

<p>This essay argues that the complete harmonisation of transfer pricing rules with the arm’s length principle is unattainable for three reasons. First, states are not under a legal obligation to apply the principle outside of treaty or domestic law. Second, the theoretical shortcomings of the principle are creating a divergence from the OECD guidelines on how the principle should be applied. Third, the perception held by states that multinational enterprises are not paying a fair share of tax is also creating a divergence from the OECD guidelines on the principle. The resultant divergence is a significant obstacle to transfer pricing harmonisation.</p>

scholarly journals The Harmonisation of Transfer Pricing: the Obstacles, the Arm's Length Principle and the OECD Guidelines

2021 ◽  
Author(s):  
◽  
Duran Timms
Keyword(s):  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Legal Obligation ◽  
Fair Share ◽  
Pricing Rules ◽  
Arm’S Length Principle ◽  
Significant Obstacle ◽  
Domestic Law

<p>This essay argues that the complete harmonisation of transfer pricing rules with the arm’s length principle is unattainable for three reasons. First, states are not under a legal obligation to apply the principle outside of treaty or domestic law. Second, the theoretical shortcomings of the principle are creating a divergence from the OECD guidelines on how the principle should be applied. Third, the perception held by states that multinational enterprises are not paying a fair share of tax is also creating a divergence from the OECD guidelines on the principle. The resultant divergence is a significant obstacle to transfer pricing harmonisation.</p>

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