Arcotia Hatsidimitris - International Tax Dialogue

58 – 7. RESOURCES, SKILLS AND USE OF SPECIALISTS
Tax administrations around the world told the study team that they face many common
administrative challenges in tackling transfer pricing, even though they may address them in different
ways. This chapter identifies some of those key challenges, a number of which are interlinked, and
describes some of the solutions deployed by tax administrations.
Resources
Major accounting and law firms generally have all the expertise necessary to handle transfer
pricing cases and are able to deploy that resource flexibly. If a case is significant the taxpayer, or its
advisor, will usually buy in any resource not already available to them. Tax administrations are usually
much more constrained when it comes to resources. A tax administration can be stretched by the
complexity and volume of cases it has to tackle at any particular time, its people will frequently have
less relevant industry knowledge and may lack the skills and experience of specialists in the major tax
firms focused only on transfer pricing. Many tax administrations have said that they lose experienced
transfer pricing specialists to the private sector for significantly increased salaries and therefore face
the constant challenge of needing to renew and re-skill their teams. This makes it harder for tax
administrations to deploy sufficient skilled people to progress cases as rapidly as they would like. As a
result the efficient organisation of transfer pricing work and effective knowledge management are
particularly important.
Knowledge management
Knowledge management in transfer pricing often works better in the private sector than in tax
administrations. There are two crucial aspects to this; maintaining and sharing relevant precedent, and
capturing learning from individual cases. Poor knowledge management can impact negatively on
every stage of the audit or enquiry process: it can hinder effective identification of risks, lead to delay
and can substantially weaken the position of tax administration negotiators at conclusion of the case.
Many tax administrations have to balance the benefits of sharing learning from individual cases more
widely with colleagues with the need to preserve taxpayer confidentiality and restrict details of
individual cases whilst at the same time as sharing the principles.
Effective governance of transfer pricing work also helps to create the conditions for good
knowledge management. Senior managers are aware of the most significant cases and are able to
ensure consistency of treatment when cases come to settlement. The governance process naturally
supports the collection and maintenance of records of how cases have been settled and ensures that
this information is shared among the key decisions makers. Even the smaller cases will have been
reviewed by more than one person, which also encourages knowledge sharing and consistency. In
administrations that track all their transfer pricing enquiries centrally, knowledge management is
catching up with best practice in the private sector and oversight of the work is actually more effective
than in some large advisory firms.
Training
Tax administrations recognise the difficulty of developing and maintaining their professional
knowledge and experience. Particular challenges include losing expertise, either as transfer pricing
experts move to the private sector, or as a result of the normal turnover of staff within the
organisation; managing training programmes which can compete with those of the private sector,
whilst facing different cost constraints; and simply keeping up with fast moving developments in the
commercial world.
DEALING EFFECTIVELY WITH THE CHALLENGES OF TRANSFER PRICING © OECD 2012