RISK INDICATORS OF TRANSFER PRICING ACCORDING TO THE DOCUMENTS OF INTERNATIONAL ORGANIZATIONS AND WAYS OF THEIR FURTHER USE

2021 ◽  
Vol 296 (4) ◽  
pp. 59-65
Author(s):  
VIACHESLAV KRUGLIAK ◽  
Keyword(s):  
International Organizations ◽  
Transfer Pricing ◽  
General System ◽  
International Taxation ◽  
Risk Indicators ◽  
General Terms ◽  
Separate Category ◽  
Pricing Rules ◽  
Processing Information ◽  
Pricing Risk

The article discusses the issue of establishing a list of transfer pricing risk indicators and determining further ways to use them. The problem of defining and using indicators of transfer pricing risks is relevant and has only recently begun to be discussed by experts in the field of international taxation and in academia. In fact, this category was not study as a separate category of indicators of tax risks, but was only considered in general terms as one of the types of tax risks. The study identified documents from international organizations that consider transfer pricing risks as a separate category of tax risks, as well as an element of tax control over taxpayers’ compliance with transfer pricing rules. On the basis of these documents, which summarize the international practice of transfer pricing, an indicative list of transfer pricing risk indicators has been studied and formed and recommendations have been developed on how to further use it by the tax authorities of Ukraine. The definition in this article of an indicative list of transfer pricing risk indicators in accordance with the documents of international organizations is an important prerequisite for understanding further steps to improve the domestic transfer pricing tax control system as a risk-oriented system. The author to suggested to using this list in the future for development and / or creation: a national indicative list of transfer pricing risks indicators and a domestic system for classifying and assessing such risks; standardized processes for identifying and processing information about potential transfer pricing risks and their integration into standardized processes of the general system for processing tax risks in the State Tax Service of Ukraine; determination methods (guidelines) and training materials on this issue; processes for selecting taxpayers for audits and evaluating the results of transfer pricing audits, and the like.

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

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).

scholarly journals Flaws in taxation of transnational corporations using the transfer-pricing rules

2020 ◽  
pp. 58-63
Author(s):  
Anastasiia Andreevna Iugina
Keyword(s):  
Transfer Pricing ◽  
Transnational Corporations ◽  
Transnational Corporation ◽  
International Taxation ◽  
Lack Of Information ◽  
Pricing Rules ◽  
The Subject ◽  
Definition Of ◽  
Available Information

The subject of this research is the transfer-pricing rules applied in various countries, their peculiarities and flaws from the standpoint of approach to taxation of transnational corporations overall; as well as practical issues of implementation of transfer-pricing rules for transnational corporations and fiscal authorities, namely the problems of avoidance of taxation by the representatives of transnational corporations and ambiguity of the applied approaches towards regulation. The author examines differences in the rules applied by various jurisdictions, as well as law enforcement problems emerging thereof. Relevance of the topic is substantiated by high significance of transfer-pricing rules for taxation of transnational corporations, as well as the need for ensuring universality in international taxation. The main conclusions lie in determination of substantial ambiguity in the transfer-pricing riles, associated with the lack of information on comparable transaction in the available information systems, as well as assessment of rules with regards to each individual situation. The mechanism employed by the Organization for Economic Cooperation, aimed ate elimination of flaws in transfer-pricing rules, such as consensual procedure, are expensive and often ineffective for transnational corporations. Therefore, elimination of dual taxation is achieved only in some situations. Differences of legislation on transfer pricing in various jurisdictions can also lead to dual taxation of transnational corporations. Moreover, the “arm’s length” principle do not allow reflecting synergetic effects that emerge in the context of activity of transnational corporation, and thus, definition of taxation base within the framework of acting transfer-pricing rules is incomplete.

Taxes, Transfer Pricing, and The Multinational Enterprise

2009 ◽  
Author(s):  
Lorraine Eden
Keyword(s):  
United States ◽  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Multinational Enterprise ◽  
The United States ◽  
International Taxation ◽  
Complex Issue ◽  
Daunting Task ◽  
National Governments

For more than ten years now, transfer pricing has been the top international taxation issue faced by multinational enterprises (MNEs). This article aims to outline, for the reader, the complex issue of transfer pricing, as seen by MNE managers and by governments faced with the daunting task of taxing business profits. The article is organized as follows. First, it briefly discusses transfer pricing from the MNE's perspective and the problems that this raises for national governments. It then reviews the basic rules of international taxation as they apply to MNE profits. The specific rules and procedures that apply to transfer pricing, as practiced in the United States and recommended by the OECD, are then outlined. It concludes with a discussion of unresolved problems that are likely to plague transfer pricing over the next few years.

scholarly journals Corporate Income Shifting in an Era of Tax Multilateralism: The Impact of Exchange-of-Information Agreements

2021 ◽  
Vol 69 (2) ◽  
pp. 357-389
Author(s):  
Devan Mescall ◽  
Paul Nielsen
Keyword(s):  
Multinational Corporations ◽  
Multinational Enterprises ◽  
Transfer Pricing ◽  
Empirical Studies ◽  
Annual Reports ◽  
Income Shifting ◽  
Exchange Of Information ◽  
Pricing Rules ◽  
Using Data ◽  
The Impact

Using data from the annual reports of over 100,000 subsidiaries of multinational enterprises (MNEs) from 55 countries between 2003 and 2012, the authors of this article investigate the impact of exchange-of-information agreements ("EOI agreements") on tax-motivated income shifting. Transparency created by the signing of EOI agreements is expected to reduce the tax-motivated shifting of income by multinational corporations. Whether such agreements affect the income-shifting behaviour of multinational corporations is an unanswered question. The authors find evidence that, on average, EOI agreements do have an impact on tax-motivated income shifting. Additionally, they find that more advanced, modern EOI agreements are associated with a larger decrease in tax-motivated income shifting compared to the impact of early EOI agreements. This evidence challenges the prevalent assumption in empirical studies that EOI agreements are homogeneous. Supplemental analyses suggest that factors that affect the information asymmetry between MNEs and tax authorities, such as corporations with high levels of intangibles and tax authorities with strong transfer-pricing rules and enforcement, can diminish or enhance the effectiveness of EOI agreements in moderating tax-motivated income shifting. The evidence provided by this study shows that consideration of the tax authorities' information environment and the substance of an EOI agreement is essential when assessing the impact of such an agreement on the tax behaviour of sophisticated taxpayers such as multinational corporations.

Simplification in Transfer Pricing

2021 ◽  
Vol 22 (3) ◽  
Author(s):  
Aitor Navarro
Keyword(s):  
Developing Countries ◽  
International Organizations ◽  
Transfer Pricing ◽  
Policy Option ◽  
Profit Shifting ◽  
Accepted Standard

It is the aim of this contribution to sustain that, despite the inherent complexity that the enforcement of the arm’s length rationale entails, it is feasible—and desirable—to introduce simplification measures without abandoning this worldwide accepted standard, especially in the context of developing countries and despite reticence shown by international organizations such as the OECD. Complexity in transfer pricing erodes fairness and equity and promotes profit shifting, which paradoxically constitutes the opposite outcome that this set of rules wants to achieve. This is the reason why it is urgent to propose and encourage the adoption of a means to neutralize unnecessary complexity in this field. The adoption of rebuttable predetermined margins and/or methods is proposed as the best solution in a context in which policymakers want to keep the arm’s length rationale intact. Also, even despite its shortcomings, irrebuttable predetermined safe harbors should be considered potentially feasible and a valid policy option.

scholarly journals Gray Markets and Multinational Transfer Pricing

2011 ◽  
Vol 87 (2) ◽  
pp. 393-421 ◽  
Author(s):  
Romana L. Autrey ◽  
Francesco Bova
Keyword(s):  
Social Welfare ◽  
Marginal Cost ◽  
Transfer Pricing ◽  
Foreign Market ◽  
Multinational Firm ◽  
Foreign Subsidiary ◽  
Foreign Subsidiaries ◽  
Gray Market ◽  
Pricing Rules ◽  
Transfer Prices

ABSTRACT Gray markets arise when a manufacturer's products are sold outside of its authorized channels, for instance when goods designated by a multinational firm for sale in a foreign market are resold domestically. One method multinationals use to combat gray markets is to increase transfer prices to foreign subsidiaries in order to increase the gray market's cost base. We illustrate that, when a gray market competitor exists, the optimal transfer price to a foreign subsidiary exceeds marginal cost and is decreasing in the competitiveness of the domestic market. However, a multinational's discretion in setting transfer prices may be limited by mandatory arm's length transfer pricing rules. Provided gray markets exist, we characterize when mandating arm's length transfer pricing lowers domestic social welfare relative to unrestricted transfer pricing. We also demonstrate that gray markets can lead to higher domestic tax revenues, even when gray market firms do not pay taxes domestically.

scholarly journals Transfer Pricing Rules, OECD Guidelines, and Market Distortions

2014 ◽  
Vol 16 (4) ◽  
pp. 650-680 ◽  
Author(s):  
KRISTIAN BEHRENS ◽  
SUSANA PERALT ◽  
PIERRE M. PICARD
Keyword(s):  
Transfer Pricing ◽  
Pricing Rules
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