Arcotia Hatsidimitris - International Tax Dialogue

7. RESOURCES, SKILLS AND USE OF SPECIALISTS – 59
Complexity
A number of tax administrations considered that transfer pricing, although it is a far from
straightforward subject, can become unnecessarily complicated when, for example, engagement with
advisers leads to excessive analysis of perceived legal issues, premature legal argument, deployment
of specialists and experts before they are needed, and generally unfocused economic analysis. Some
suggested that this risked creating a mystique around transfer pricing work which could deter
developing countries from taking up cases, hinder more developed countries, and could increase the
costs for all. Those who raised this concern recognised that tax administrations, advisors and business
alike all played their part in contributing to this perceived over-complication.
Resources and skills – solutions
Resources, knowledge management and training
One of the ways in which tax administrations tackle some of the challenges outlined above lies in
the organisation of their in-house resource. Tax administrations tend to organise their transfer pricing
work in line with one of two broad business models. The first model is based on specialist teams who
undertake the end to end process of transfer pricing – from risk identification through to resolution of
audits and enquiries.
South Africa, for example, is presently building an international tax team of up to
40 people which will handle transfer pricing in this way. This model allows significant expertise to be
built up and maintained but it does not grow across the tax administration a broad base of knowledge
and skills in relation to transfer pricing risk.
An alternative model involves creating a specialist function at the centre of the tax administration
to support and advise auditors and inspectors how best to address the technical issues arising on their
transfer pricing cases. It is rare for these specialists to work cases themselves but that can happen
when issues are particularly novel or contentious. The advantage of this approach is that transfer
pricing risk is identified alongside other tax risks by auditors and inspectors with the greatest
knowledge of the business. This approach also allows for greater flexibility in resource deployment.
A number of tax administrations combine the approaches in a range of ways. In the UK, for
example, there is a central specialist advisory team on transfer pricing who do not generally lead on
audits or enquiries. The UK also has a number of specialists within its LBS who share their experience
of working transfer pricing cases with auditors and inspectors managing tax risk on a day to day basis.
Leadership on transfer pricing and all other tax risk dealt with in the LBS is provided by the Customer
Relationship Manager (CRM) accountable for the tax compliance of individual large businesses.
The OECD sponsored multilateral training programmes offer an innovative approach to training
in this area and one that helps to foster a common understanding of the issues among tax
administrators from different countries.
DEALING EFFECTIVELY WITH THE CHALLENGES OF TRANSFER PRICING © OECD 2012