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UN influence on transfer pricing
The UN's interest in transfer pricing indicates that conflicts are brewing globally over transfer pricing. Taxand USA discusses how transfer pricing is becoming a battlefiled with multinationals at risk of getting caught in the crossfire.
The UN's draft alternative transfer pricing guidelines are specifically tailored for use by developing nations. The guidelines are a practical manual for setting up transfer pricing rules from scratch, enabling countries lacking the decades of economic theory to implement transfer pricing legislation. It would appear that the UN is also attempting to placate Brazil, China and India by accepting their transfer pricing views and potentially sanctioning them for use by others.
Naturally, it is in the interest of developing nations to adopt the UN guidelines in favour of the OECD when the result is higher domestic tax revenue - especially when considering the rate of GDP growth in Brazil, China and India.
The bottom line is transfer pricing is splitting into distinct schools of thought and the natural casualties will be the unprepared multinationals.
Quality tax advice, globally
What should multinationals be doing to prepare?
- Wherever available, consider obtaining advance pricing agreements (APAs)
- Increase internal resources dedicated to the supervision and implementation of transfer pricing
- Consider booking reserves for the likely cost of getting caught in the crossfire