Governments line up transfer pricing tax crackdown
Transfer pricing on governments' radar
Cross-border controls on transfer pricing are coming under increased levels
of scrutiny as governments target them as an easy source of tax revenues,
according to
KPMG.
Businesses with operations in China, Vietnam and Greece face vastly expanded
checks on pricing, while most Western economies are tightening up their own
cross-border audit programmes, reported the firm’s Global Transfer Pricing
Services practice.
Authorities are keen to target tax discrepancies around transfer pricing. It
is the costing of assets or services transferred within an organisation, which
differs from arms-length pricing – the transfer of services across borders
between unrelated companies.
Many of Europe’s largest economies have introduced a raft of new measures,
the survey found, including new documentation requirements, increased use of
transaction-based methodologies and stricter valuations of intellectual property
and business opportunities.
The most active region was Asia-Pacific, with India, Australia, China, the
Republic of Korea and Japan all noting increases in audit activity, with
Singapore expected to follow suit, all bolstering their tax regimes to match
Western levels of scrutiny. Similarly, Eastern Europe is seeking to capitalise
on the number of firms launching in the region hoping to take advantage of lower
costs.
Companies operating in the US are increasingly turning to advance pricing
agreements (APAs), an agreement made in advance between the taxpayer and the
authorities on the prices of a transaction, in the hope of predicting future tax
revenues more stably.
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