Transfer pricing and mispricing
- It’s the equivalent of asking the Internal Revenue Service to connect the ends of two different plates of spaghetti.
U.S. Senator Bryan Dorgan, on current arm's length transfer pricing rules
- Ask any tax vice president what is the biggest issue on their agenda and 99 percent of them will say it’s transfer pricing. This is
not surprising given that transactions between related subsidiaries dominate world trade. From a tax perspective, transfer pricing is where
the big bucks lie.
Jeffrey Owens, head of the OECD’S Centre for Tax Policy and
- "A cumbersome creation of stupefying complexity” with “rules that lack coherence and often work at cross purposes.
Experts cited on the subject of the OECD-led "arm's length" approach to transfer pricing.
- The problems of implementation appear to be getting worse rather than better. . . combined reporting is vastly superior to the current system, assuming,
of course, that nation-states could agree to implement it.
Professor Michael J. McIntyre, on the "arm's length" approach
- The ALS (Arm's Length Standard) creates a climate of uncertainty and an immense administrative burden for the taxpayers, the IRS and the courts and provides ample opportunity for abuse.
Reuven Avi-Yonah, 2006
- Transfer pricing is the corporate equivalent of the secret offshore accounts of individual tax dodgers
Senator Carl Levin, May 2010
- Combined reporting would result in a fairer sharing of tax revenue among nation-states, would reduce substantially the opportunities for tax avoidance and evasion that MNEs enjoy under the current system, and would simplify compliance for tax departments and taxpayers.
Michael J. McIntyre
- Experience to date is sufficient to demonstrate that the current system is based on faulty assumptions regarding the way multinational business is conducted, so that the system, no matter how hard one seeks to reform it, simply is not capable of functioning acceptably.
Michael Durst, a top U.S. transfer pricing expert on the arm's length principle
- Incompatible with today’s global economy
Tax experts Reuven Avi-Yonah and Kimberly Clausing on the arm's length principle
- It is difficult to overstate the crisis in the administration of the international tax system of the United States.
Observers cited as testifying before the U.S. President’s Advisory Panel on Federal Tax Reform.
- Current transfer pricing rules have spawned a huge industry of
lawyers, accountants and economists whose professional role is to assist
multinational companies in their transfer pricing planning and
- Once you take on board the fact that more than 60% of world trade takes place within multinational enterprises, the importance of
transfer pricing becomes clear.
is losing a lot of money in tax to international operations. There is
no adequate legislation governing transfer pricing...when there is a
request for transfer pricing placed with the tax authorities, nobody
knows how to deal with the request
Unnamed official from a Big Four accountancy firm, via David McNair, Christian Aid, April 2010
head of tax policy at a large multinational recently told me that
companies are now allocating more profit and paying more tax to the most
aggressive tax authorities to avoid expensive and difficult legal
disputes over transfer pricing. As a result, fewer profits are allocated
to developing countries.
David McNair, Christian Aid, April 2010
- The problems with the current system derive not from rules at its periphery, but instead from a fallacy that lies at the system’s central core: namely, the belief that transactions among unrelated parties can be found that are sufficiently comparable to transactions among members of multinational groups that they can be used as meaningful benchmarks for tax compliance and enforcement.
Reuven Avi-Yonah on the current "arm's length" approach to transfer pricing taxation.
- My overall – if reluctant – view, after years of practice in this field, is that the critics are fundamentally correct; the current system fails utterly in its public role, the appearances created are unseemly, and the system should be replaced.
Michael Durst , former director of the the US Internal Revenue Service’s “Advanced Pricing Agreement Program, 2010