Tax authorities seeking more penalties for mistakes on TP
Tax authorities around the world are becoming more aggressive on transfer
pricing issues, according to experts in Ernst & Young offices around the
A study shows that E&Y staff are seeing a ‘dramatic’ increase in the
documentation demanded by governments and a greater willingness to impose high
penalties more frequently when companies get their transfer pricing calculations
Transfer pricing relates to calculating the tax due when goods or assets are
transferred between companies in the same group.
Authorities fear companies under price the assets as a means of drastically
reducing their tax liabilities.
John Hobster, global accounts leader for transfer pricing at Ernst &
Young, said: “Amid the challenges of a global economic downturn, many
governments are sharpening their focus on compliance, enforcement and
legislative approaches. While TP regulations were once confined to a handful of
industrialized countries, they have since spread rapidly. As governments search
for tax revenues to offset growing budget deficits, multinationals will have to
be prepared for more TP investigations.”
E&Y said it expects more litigation in the future as tax authorities
attempt to maximise revenues during the recession.