Arcotia Hatsidimitris - International Tax Dialogue

64 – 7. RESOURCES, SKILLS AND USE OF SPECIALISTS
• used the UK’s Government Actuary Department because of their expertise on pricing returns
on capital.
How to engage with external specialists
The decision about whether to retain external specialists to provide bespoke advice on particular
issues or to recruit specialists from the private sector as employees of a tax administration can be a
difficult one. Where experts are independent of the administration, they are able to provide an
unbiased view about how transactions differ from those that would have taken place at arm’s length.
They command authority and have either first-hand commercial experience, or experience of advising
in commercial assignments, to help formulate rigorous arguments, supported by reference to academic
studies and theories. Many have considerable experience as expert witnesses and are consequently
skilled in framing forensic arguments clearly and precisely, and in bringing resolution to disputes. It
should also be noted that external experts are generally dependent on their success in past assignments
in order to attract new work and this can be a powerful incentive for them to deliver outstanding
performance.
What external specialists can deliver
Importantly experts can help focus interventions on the key risks and issues and assist in framing
information requests. For example, they are often able to advise, from personal experience, precisely
what documentation should be available to bring out key facts. This is invaluable in helping to focus
in on those key issues and scope out areas of dispute to provide added credibility to the
administration’s engagement on an issue. The experience in South Africa of using external experts to
support the preparation of transfer pricing cases and give evidence in court has been very successful.
However, SARS has also found that industry experts can sometimes be reluctant to help a tax
administration, whether in the context of conducting audits and enquiries, or in litigation, if those
experts have an expectation of other pricing work, perhaps elsewhere in their area of expertise.
Selecting the specialist
In selecting experts it is important to find individuals who can explain technical issues in ordinary
language and who, where relevant, are articulate and persuasive in court. Both HMRC and SARS
have also found that in transfer pricing cases commercial litigators are often more effective than tax
litigators. Transfer pricing cases are very fact dependant and commercial litigators are more
experienced in drawing out factual evidence in cross-examination. In Denmark, SKAT is now
permitted to make more and more use of the private tax legal advisors that acts as counsel of the State.
It is SKAT’s experience that the additional costs that may be incurred are balanced by the help
received in deciding matters of principal and preparing transfer pricing cases for court.
Knowledge and skills transfer from specialists
Ensuring transfer of knowledge and skills from external experts to tax administration staff
working transfer pricing cases can be more challenging as these experts often tend to focus principally
on ensuring the success of their assignment. Recruiting specialists and/or experts as employees is
generally a more successful way of delivering transfer of knowledge and skills and this is best done by
enabling them to play a part in the work of several teams at the same time. Whilst in house experts and
specialists can be successful as expert witnesses in litigation or in hearings connected with processes
for alternative dispute resolution, over time they become increasingly detached from specific industry
developments and knowledge and therefore lose some expertise. That can mean they become less able
to make a meaningful contribution on individual cases.
DEALING EFFECTIVELY WITH THE CHALLENGES OF TRANSFER PRICING © OECD 2012