Arcotia Hatsidimitris - International Tax Dialogue

76 – 8. TRANSFER PRICING AND DEVELOPING COUNTRIES
achieve this. This will represent a valuable addition to the work of the Global Forum on Transparency and
Exchange of Information for Tax Purposes and the Informal Task Force on Tax and Development.
In general, developed countries have larger networks of information exchange and double taxation
agreements than developing countries. They are therefore likely to have more experience of negotiating
exchange of information articles in their treaties and tax information exchange agreements. These are skills
which could be shared to good effect with developing countries and should be included in the register
referred to above.
Key thoughts for the chapter
Over the last five years developing countries have grown their awareness of the risk of significant tax
loss through transfer pricing and the importance of developing their skills and expertise to meet this
challenge. Although many multi-national enterprises invest significantly to ensure that transactions which
do not take place in an open market are priced properly, a number do not and there are growing concerns
that the economies of developing countries are disadvantaged by their failure to do so.
Many of the issues faced today by developing countries share common features and have previously
been addressed by others. It follows that the best source of support for developing countries in the context
of transfer pricing lies in closer international collaboration amongst developing countries in comparable
situations and more widely in the international community. This will help tax administrations in
developing countries to improve their transfer pricing skills and knowledge while at the same time
levelling the trading playing field across the globe.
There are two key recommendations to assist this process. First, delivering the register referred to
above. With co-operation from all members of the FTA it should not be too difficult to develop. The FTA
could also help to develop a diagnostic tool that will help developing countries to identify the aspects of
their transfer pricing regime that are priorities for improvement. That will allow them to make more
informed choices between the types of assistance catalogued on the register.
Second, ATAF is already planning a conference on transfer pricing to share knowledge and build
expertise. This should take place in an ATAF member country during 2012. The FTA should work with
ATAF to agree how it can contribute to that event and help partner experienced and less experienced tax
administrations to find solutions to key challenges on transfer pricing that are the right solutions in the
context of the individual needs of African countries. The OECD Task Force is already closely involved
with this event. The FTA and the Task Force will co-ordinate their contributions.
The FTA should lend its support to the joint European Commission, OECD and World Bank pilot
study in Ghana and, if this is a success, it could be extended to other countries. More generally, the FTA
should encourage all countries to adopt a more pragmatic approach to transfer pricing, recognising that it is
more of an art than a science. In this context the work of the United Nations on a practical manual on the
application of the arm’s length principle is very welcome, as is the work that the OECD’s Working Party 6
is now commencing on the simplification of transfer pricing.
DEALING EFFECTIVELY WITH THE CHALLENGES OF TRANSFER PRICING © OECD 2012