Transfer pricing as a way of minimizing the tax burden: international experience of counteraction

Tax avoidance is an important element of management in the global economy. Managers use tax havens for reducing a company’s effective tax rate. The most common practices in international tax planning can be divided into three groups: loans and their related interest, royalties, and transfer pricing. The aim of this article is to find the determinants of the tax burden faced by foreign-owned subsidiaries. Therefore, a model was created for the tax burden, focusing on the special position of subsidiaries within international tax planning. For this purpose, taxes/outcomes was established as a new dependent variable. The panel data used include Czech companies that are owned by parent companies located in other EU countries. The model distinguishes EU tax havens from regular member states; sector dummy variables are also included. The regression model that was created did not confirm the assumed dependencies. Rather, it indicated other important determinants: profitability, the share of intangible assets, size, and the dummy variable for the ICT sector. Based on the regression results, the independent variables connected with known tax planning schemes have relatively low importance. The significance of these results can be seen in the subsequent conclusions. First of all, there is no difference between the subsidiaries’ tax burdens based on the parent company’s location. Corporations use international tax planning whether or not they are owned from a tax haven. The second significant conclusion indicates the importance of certain sectors and their attributes concerning the tax burden. Companies from the ICT sector are linked to a lower tax burden. On the other hand, the dependencies within the financial sector are not statistically significant. From the perspective of further research, it would be constructive to incorporate the subsidiary’s position within the group.

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Analisis Keputusan Transfer Pricing Berdasarkan Pajak, Tunneling dan Exchange Rate

JURNAL AKUNTANSI DAN PAJAK ◽

10.29040/jap.v20i2.756 ◽

2020 ◽

Vol 20 (2) ◽

Author(s):

Hani Sri Mulyani ◽

Endah Prihartini ◽

Dadang Sudirno

Keyword(s):

Exchange Rate ◽

Exchange Rates ◽

Stock Exchange ◽

Transfer Pricing ◽

Tax Burden ◽

Manufacturing Companies ◽

Pricing Decisions ◽

Pricing Decision ◽

The Government ◽

Positive Effect

Tax has two points of view, for the government tax is a source of state revenue that has the largest contribution, but for tax companies is a burden that must be paid. Often companies do tax planning strategies so that the tax burden that must be borne by the company becomes smaller. Companies usually exploit loopholes from the use of accounting methods allowed by accounting and taxation rules. Transfer Pricing is one of the ways companies take to reduce the tax burden. This study aims to determine and obtain empirical evidence about the effect of tax, tunneling and exchange rates on transfer pricing decisions both partially and simultaneously on manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the 2013-2017 period. The research method used is descriptive and verification analysis method. The population in this study were 144 manufacturing companies listed on the Indonesia Stock Exchange in the period 2013-2017. Sampling using a purposive sampling method and obtained a sample of 20 companies. The results of this study indicate that partially significant positive effect on transfer pricing decisions, tunneling does not significantly influence the transfer pricing and exchange rate decisions do not significantly influence the transfer pricing decision, but simultaneously the results of this study indicate that taxes, tunneling and exchange rates affect significant to the transfer pricing decision.

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INTERNATIONAL EXPERIENCE IN PROCESSING AND ASSESSMENT BY REGULATORY AUTHORITIES OF TRANSFER PRICING RISKS

HERALD of Khmelnytskyi national university ◽

10.31891/2307-5740-2021-296-4-25 ◽

2021 ◽

Vol 296 (4) ◽

pp. 156-162

Author(s):

YEVHEN KURILOV ◽

Keyword(s):

Risk Assessment ◽

Risk Management ◽

Transfer Pricing ◽

Developed Countries ◽

International Experience ◽

Enterprise Group ◽

Risk Indicators ◽

Regulatory Authorities ◽

Pricing Rules ◽

Pricing Risk

The article analyzes and summarizes the international experience of regulatory authorities in dealing with transfer pricing risks as one of the basic elements of tax control over taxpayers’ compliance with transfer pricing rules. An efficient process for processing and assessing transfer pricing risks helps to ensure quality selection and increase the effectiveness of audits of controlled transactions, increase the efficiency of the use of limited resources, as well as greater tax certainty and reduce the number of unreasonable audits. As a result of the study: international experience was summarized and an indicative process of processing and assessing transfer pricing risks was determined; the main points of the general approach to the issue of transfer pricing risks, which are currently used in practice by the regulatory authorities of economically developed countries, have been identified; the principles of transfer pricing risk management were determined and the importance of carrying out transfer pricing risk assessment processes on an ongoing and systematic basis was indicated; the approaches to organizing the processing and risk assessment of transfer pricing proposed by the specialists of the OECD, JTPF and the UN are considered. Also, the author of the article proposed to supplement this process with a fifth post-assessment stage, which should include the following three steps (13-15): internal inspection and quality control of risk assessment processes based on the results of transfer pricing audits; improving the list of transfer pricing risk indicators and descriptions of their features and identification methods; training and professional development of specialists in the assessment of transfer pricing risks. In addition, attention was drawn to the need for proper documentation of the processing and risk assessment of transfer pricing. The article also concludes that the processes of processing and assessing transfer pricing risks should be integrated into the processes that are carried out within the framework of the functioning of the general risk management system of both the tax authority and any modern large enterprise (group of enterprises).

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IMPROVING THE TAXATION OF ENTERPRISES IN UKRAINE BY TAKING INTO ACCOUNT THE INTERNATIONAL EXPERIENCE OF REFORMING TAX SYSTEMS

10.32782/2224-6282/172-6 ◽

2021 ◽

Author(s):

Yuliia Ohrenych ◽

◽

Viktoriia Dibrova ◽

Keyword(s):

International Experience ◽

Tax Burden ◽

State Budget ◽

Tax System ◽

Electronic Documents ◽

Advantages And Disadvantages ◽

The Usa ◽

Tax Benefits ◽

Tax Payments ◽

The Eu

The article is devoted to the study of the peculiarities of taxation of enterprises in Ukraine on the example of the postal company JSC "Ukrposhta", as well as the study of international experience of other countries in the taxation of enterprises. The paper investigates different approaches of scientists to the concept of "tax burden" and "tax system". The debt of Ukrposhta JSC to the state budget is considered and its financial indicators are analyzed, namely income from sales of products, equity and their dependence on the amount of tax burden. According to the research, the main financial and economic indicators that are most exposed to the tax burden were identified and recommendations were given on which indicator to pay attention to. The paper identifies the advantages and disadvantages of the tax burden, among which should be highlighted the amount of taxes paid to the budget, which should be monitored in order to increase investment in the country. Methods of stimulating enterprises to pay taxes and directing the tax burden to improve the investment climate in the country are also proposed. One of the most common methods of stimulating tax payments is the provision of tax benefits, but it also has its drawbacks. In this paper, the European experience of using the tax burden as an incentive to pay taxes was considered. Peculiarities of enterprise taxation in the EU and the USA are studied. The advantages and disadvantages of the tax system of Ukraine are analyzed and several areas of its improvement are proposed based on the experience of the EU and the USA. Hiding the income of enterprises is the main problem of the tax system of Ukraine and it is it that needs to be solved in the first place. Ways to stimulate the payment of taxes to the budget are proposed and methods of reforming the current tax system by taking into account international experience are considered. One of the proposed methods to improve the tax climate is the introduction of electronic reporting through the first Ukrainian application "Action", which collects all electronic documents of citizens. At present, this application is the only one in the world that combines so many electronic documents.

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Country-by-country reporting: international experience of implementation

Fìnansi Ukraïni ◽

10.33763/finukr2021.06.029 ◽

2021 ◽

Vol 2021 (6) ◽

pp. 29-39

Author(s):

Iryna KRYSHTOPA ◽

◽

Larysa NIKOLENKO ◽

Keyword(s):

Income Distribution ◽

Tax Evasion ◽

Information Exchange ◽

Multinational Enterprises ◽

Transfer Pricing ◽

International Experience ◽

Country Report ◽

Financial Flows ◽

National Legislation ◽

International Group

Considering the tasks set for Ukraine in frames of combating tax evasion of multinational enterprises, it is extremely important to bring the provisions of national legislation in line with international rules of tax administration. This primarily concerns the creation of institutional conditions in order to increase the financial flows transparency of multinational enterprises for tax administrations and enable them to obtain necessary information for identifying and assessing transfer pricing risks.Nowadays, more than 100 countries prepare a country-by-country report of an international group of companies, which discloses data on activities of certain enterprises in accordance with the requirements of national legislation and the unified standard of country-by-country reporting, approved by the OECD [1]. However, the analysis of domestic practice of reporting by countries of international group of companies, as well as the study of other regulations, which application allows metropolitan countries to ensure the transparent level of taxation of their multinational corporations, indicates the need for further improvement of domestic mechanisms for counteracting tax base erosion and exchange of information obtained in the framework of international exchange. This fact actualizes a chosen research topic. It is revealed that information disclosed in country-by-country reports gives the possibility for tax administrations to assess high risks of transfer pricing. In turn, the development of the mechanism for ensuring confidentiality and appropriate use of such reports will oblige taxpayers to careful adhere to transfer pricing rules and mandatory tax information exchange. The investigation of international experience in frames of implementation of uniform standards for the disclosure of information on income distribution and tax payments suggests the importance of country-by-country reporting. And identification of main trends in the field of international initiatives on issues of disclosure of income distribution information by groups of enterprises brings Ukraine closer to the consistent implementation of this approach in practice of international groups of companies.

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Tax Avoidance and Transfer Pricing

International Journal of Corporate Finance and Accounting ◽

10.4018/ijcfa.2021070103 ◽

2021 ◽

Vol 8 (2) ◽

pp. 28-39

Author(s):

Nikolaos Eriotis ◽

Spyros Missiakoulis ◽

Ioannis Dokas ◽

Marios Tzavaras ◽

Dimitrios Vasiliou

Keyword(s):

Causal Relationship ◽

Transfer Pricing ◽

Tax Avoidance ◽

Multinational Companies ◽

Tax Burden ◽

Tax Havens ◽

The Past ◽

Extensive Analysis ◽

Using Data ◽

International Character

Globalization has led multinational companies, beyond intensifying their competitiveness, to seek ways to maximize profits through tax avoidance. The international character enables them to transfer profits to tax havens or seek transactions that will enable them to avoid, postpone, or pay lower taxes. Although the previous allegations have been hypothesized by researchers, tax audits, and governments, it is difficult to prove due to the chaotic data and the causal relationship between variables. The present study compared the tax burden of 971 multinationals and 1,160 independent companies for the years 2010-2017 in Greece, using data from the Amadeus Tp-Catalyst database and confirmed previous research on significant differences in terms of profits and tax burdens. To the authors' knowledge, there has not been attempted such an extensive analysis for Greece in the past.

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