Meeting at OECD’s first Global Forum on Transfer Pricing, tax officials from 90 countries agreed on the need to simplify transfer pricing rules, strengthen the guidelines on intangible issues and improve the efficiency of dispute resolution.
Transfer pricing rules determine how international transactions within a multinational company must be priced to ensure each country receives its fair share of tax. Based on the OECD and UN Model tax conventions, the rules are meant to eliminate double taxation and ensure better compliance by companies. These rules now need to be simplified and made more robust. This is particularly critical in the area of intangible assets, whose location may have a strong impact on tax revenues.
As he opened the Forum, OECD Secretary-General Angel Gurría emphasised that “the time has come to simplify the rules and alleviate the compliance burden for both tax authorities and taxpayers. Because complicated rules can be a barrier to cross-border trade and investment and place a heavy burden on tax administrations and businesses, we are making our approach simpler without making it arbitrary.”
Explaining the importance of this work, the director of the OECD’s Centre for Tax Policy Administration, Pascal Saint-Amans said that, “It is essential to simplify and strengthen the transfer pricing rules for the benefit of both developed and developing economies, as well as for businesses. We need to take into account the views of all countries to ensure that the rules will be applied in a globally consistent manner - eliminating double taxation and avoiding double exemption. The Global Forum plays a critical role in achieving this objective. “
Delegates agreed that during the coming year the Global Forum will carry out a transfer pricing risk assessment, developing a detailed “how-to” manual which will establish good practices for governments when they assess transfer pricing risk at the beginning of an audit.