Arcotia Hatsidimitris - International Tax Dialogue

16 – 1. INTRODUCTION
The work programme
This study commenced with a written survey of FTA member countries designed to capture a
broad overview of current performance in the management of transfer pricing issues and the scope for
improvement. The survey was not designed for publication in full but the principal findings are
summarised in below. The survey was followed by a two day workshop which was attended by
transfer pricing experts from 11 tax administrations 4 . The study team also spoke to the leaders of
transfer pricing work in Singapore and China seeking their views on the issues discussed in this report.
The Commissioners of the tax administrations in South Africa, Nigeria, Rwanda and Ghana were
consulted about the particular issues that tax administrations in developing countries face when they
tackle transfer pricing risks.
The study team sought private sector input into its work in two ways. Leaders of transfer pricing
work in the “Big Four” advisory firms took part in a workshop at which they discussed their
experiences of dealing with transfer pricing enquiries involving their clients. They saw scope for
improvement in the way these enquiries are managed by tax administrations. Separately the study
team approached BIAC to obtain the views of business directly affected by transfer pricing audits or
enquiries.
The survey
The first step in the study was to establish key facts from as many FTA member countries as
possible. Tax administrations were asked to provide a range of information including: their approach
to risk assessment, how transfer pricing work is overseen, numbers of cases working at any one time,
elapsed times for audits or enquiries 5 , the average and median amounts of tax recovered over a three
year period and the way experts are used. Although the survey of the results achieved by the transfer
pricing programmes of various countries was not designed for publication 6 in full, a brief overview of
the results helps to illuminate some of the practical challenges facing tax administrations in this area of
work:
• The results confirm that transfer pricing risks are among the largest tax risks that tax
administrations are managing.
• The cases are complex and involve extensive fact gathering.
• Although some countries reported that they settle the majority of their transfer pricing cases
within 12 months, most do not and the average elapsed time was around 540 days 7 .
• Some countries recover very little tax from their transfer pricing audits or enquiries whereas
others recover very large amounts from almost all their audits.
• Obtaining information across borders is a particular issue for some countries whereas others
have very effective international relationships and use their double taxation treaty networks
to good effect.
• The stock of open cases tends to be high, usually in excess of the number of cases settled in
one year and in some countries the number was as much as 3 or 4 times the average number
of annual settlements.
DEALING EFFECTIVELY WITH THE CHALLENGES OF TRANSFER PRICING © OECD 2012