Multinational Transfer Pricing, Tax Arbitrage, and the Arm's Length Principle

2004 ◽  
Author(s):  
Chongwoo Choe ◽  
Charles E. Hyde
Keyword(s):  
Transfer Pricing ◽  
Tax Arbitrage ◽  
Arm’S Length Principle

scholarly journals TRANSAKSI DENGAN PIHAK BERELASI DAN PRAKTIK TRANSFER PRICING DI INDONESIA

2021 ◽  
Vol 2 (2) ◽  
pp. 34-52
Author(s):  
Raymondo Sitanggang ◽  
Amrie Firmansyah
Keyword(s):  
Content Analysis ◽  
Stock Exchange ◽  
Transfer Pricing ◽  
Accounting Standards ◽  
Financial Statements ◽  
Multinational Companies ◽  
Financial Accounting ◽  
Manufacturing Companies ◽  
Arm’S Length Principle ◽  
State Finance

This study aims to review transactions conducted by multinational companies operating in Indonesia related to transfer pricing activities. This study uses qualitative methods using two approaches, content analysis, and interviews. The content analysis aims to obtain related party disclosure information in the financial statements as stipulated in PSAK No. 7 (2015). The data used in the financial statements of manufacturing companies in the consumer goods industry sector are included in multinational companies and listed on the Indonesia Stock Exchange from 2014-2017. Meanwhile, interviews were conducted to confirm the data obtained through content analysis. The informant in the interview is one of the Polytechnic of State Finance STAN lecturer, who has academic expertise in international tax accounting and transfer pricing. This study concludes that, in general, multinational companies operating in Indonesia have disclosed related party information in their financial statements. Furthermore, the assessment of the fairness of transactions with related parties related to transfer pricing is based on the arm's length principle. The results of this study indicate the need for broader disclosure of financial accounting standards in Indonesia and the harmonization of taxation regulations in Indonesia with tax regulations in other countries related to transfer pricing practices.     Penelitian ini bertujuan untuk untuk mengulas transaksi-transaksi yang dilakukan oleh perusahaan multinasional yang beroperasi di Indonesia terkait dengan aktivitas transfer pricing. Penelitian ini menggunakan metode kualitatif dengan menggunakan dua pendekatan, yaitu content analysis dan wawancara. Content analysis bertujuan untuk mendapatkan informasi pengungkapan pihak-pihak yang berelasi dalam laporan keuangan sebagaimana diatur dalam PSAK No. 7 (2015). Data yang digunakan adalah laporan keuangan perusahaan manufaktur sektor industri barang konsumsi yang termasuk dalam kategori perusahaan multinasional dan terdaftar di Bursa Efek Indonesia dari tahun 2014-2017. Sementara itu, wawancara dilakukan dengan tujuan untuk mengkonfirmasi data-data yang diperoleh melalui content analysis. Informan dalam wawancara adalah salah satu dosen Politeknik Keuangan Negara STAN yang memiliki keahlian akademis dalam akuntansi perpajakan internasional dan transfer pricing. Penelitian ini menyimpulkan bahwa secara umum perusahaan multinasional yang beroperasi di Indonesia telah mengungkapkan informasi pihak-pihak berelasi dalam laporan keuangannya. Selanjutnya, penilaian kewajaran transaksi dengan pihak berelasi terkait dengan transfer pricing berdasarkan arm’s length principle. Hasil penelitian ini mengindikasikan perlunya pengungkapan yang lebih luas dalam standar akuntansi keuangan di Indonesia dan harmonisasi peraturan perpajakan di Indonesia dengan peraturan perpajakan di negara lain-lain terkait dengan praktek transfer pricing.  

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 Transfer Pricing As A Vehicle In Corporate Tax Avoidance

2016 ◽  
Vol 33 (1) ◽  
pp. 9-16 ◽  
Author(s):  
Joel Barker ◽  
Kwadwo Asare ◽  
Sharon Brickman
Keyword(s):  
Transfer Pricing ◽  
Tax Avoidance ◽  
Tax Rates ◽  
Corporate Tax ◽  
Internal Revenue ◽  
Tax Reduction ◽  
Arm’S Length Principle ◽  
Corporate Tax Rates ◽  
Foreign Affiliates ◽  
Regulatory Bodies

Using transfer pricing, U.S. Corporations are able to transfer revenues to foreign affiliates with a lower corporate tax rates.  The Internal Revenue Code requires intercompany transactions to comply with the “Arm’s Length Principle” in order to prevent tax avoidance.   We describe and use elaborate examples to explain how US companies exploit flexibility in the tax code to employ transfer pricing and related tax reduction and avoidance methods. We discuss recent responses by regulatory bodies.

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.

Place of transfer pricing in the tax system

2021 ◽  
Author(s):  
Artem Kotenko ◽  
Mykola Mishyn
Keyword(s):  
System Analysis ◽  
Transfer Pricing ◽  
Legal Regulation ◽  
Main Body ◽  
Tax System ◽  
Local Taxes ◽  
Arm’S Length Principle ◽  
Definition Of ◽  
Problem Setting ◽  
Broad Approach

Problem setting. The approach proposed by the legislator to the definition of the tax system as a set of national and local taxes and fees in the procedure established by the TC of Ukraine, constitutes the tax system of Ukraine (para. 6.3 of Article 6 of the TC of Ukraine), raises the question of the place of transfer pricing in the tax system. If you approach the tax system as a set of taxes and fees, the transfer pricing is actually excluded from the tax system. Analysis of recent researches and publications. Among the scientists involved in the research of the tax system, it is possible to distinguish M. Kucheryavenko, D. Getmantsev, N. Pryshva, O. Barin and others. Some problems of legal regulation of transfer pricing were dealt with by M. Mishin, M. Bondarenko, K. Broyakov and others. The target of the research is to analyze and determine the place of transfer pricing in the tax system. Article’s main body. The article is devoted to determining the place of transfer pricing in the tax system. We propose our own view on the tax system. It is stated that a broad approach to understanding the tax system excludes contradictions laid down in para. 6.3 of Article 6 of the TC of Ukraine. Conclusions and prospects for the development. Transfer pricing involves the application of special methods for determining the compliance of the conditions of the controlled transaction with a certain criterion – the “arm’s length” principle, drawing up and submitting reports, exercising control and bringing to responsibility for violation of transfer pricing requirements. The legislative approach to the content of the tax system as an aggregate of taxes and fees actually excludes transfer pricing from the tax system. Instead, our proposed broad approach eliminates such contradiction.

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 DEVELOPMENT OF TRANSFER PRICING IN THE CONDITIONS OF GLOBALIZATION AND WAYS TO INCREASE THE EFFICIENCY OF THE TRANSFER PRICE REGIME

2021 ◽  
Author(s):  
Inna Korin
Keyword(s):  
Global Economy ◽  
Transfer Pricing ◽  
Practical Significance ◽  
Tax Havens ◽  
Economic Relations ◽  
Arm’S Length Principle ◽  
Financial Interests ◽  
Business Confidence ◽  
Market Relations ◽  
Pricing Schemes

The mechanism of enterprises pricing for moving the main share of profits abroad to low-tax havens has been investigated. The analysis of the existing conflict of interest between MNEs is carried out, they seek to obtain super-profits and the fiscal authorities, must ensure proper control over taxation by introducing the arm's length principle. The article shows the complexity and versatility of the rules of tax control over transfer pricing. The influence of the main factors on the current methods of taxation of enterprises is determined. The nature of transfer pricing risks is characterized and the main tasks of the tax authorities are identified, which is to maximize results, while ensuring business confidence in the tax system. It is shown that transfer pricing schemes are carried out using various techniques of aggressive tax planning, requiring the introduction of additional countermeasures. In the study of transfer pricing in the context of globalization and transnationalization of international relations, it was found that due to the processes of globalization, intersectoral pricing has become a daily necessity for the vast majority of enterprises. The transfer pricing mechanism is the basis of the latest approaches to pricing in the global economy, thereby distorting the level of world fair prices. In modern conditions of development and complication of market relations, there are rapid processes of strengthening foreign economic relations of domestic economic entities and the total manifestation of globalization processes. Due to the fact that globalization is gaining momentum, it is becoming increasingly difficult to maintain the current methods of taxation of TNCs operating in different tax jurisdictions. Transfer pricing is one of the most important aspects of tax minimization in multinational companies. At the same time, the financial interests of the state are expressed in the amount of tax revenues, the solution of this contradiction makes it necessary to improve the tax regulation of transfer pricing between interdependent persons. The practical significance of the research results obtained lies in the possibility of their use in the formation of an appropriate legislative and regulatory framework.

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