Taxman accused of favouring big business on transfer pricing

Paul Bowes, international tax director at Pannell Kerr Forster, has expressed ‘very real concerns’ at recent Revenue guidance which he said puts expensive and time-consuming barriers in the way of smaller businesses involved in international transactions.

These centre on transfer pricing arrangements – the price at which goods and services are bought and sold between companies under common control – which many companies agree in advance with the Revenue through the use of advance pricing agreements.

Bowes has highlighted small print in recent guidance which says the Revenue may turn down requests for APAs where there appears to be an ‘inefficient use of resources.’

Bowes said transfer pricing was ‘probably the most significant international tax issue facing global business today’ and said there was a danger taxpayers in small businesses would find it hard to clarify genuinely difficult transfer pricing issues because of the Revenue’s stance.

The uncertainty in not being able to make such arrangements means companies are unable to assess tax costs with accuracy and certainty, making it impossible to plan for future transactions and burdening them with extra tax compliance costs, Bowes said.

The warning also conflicts with other Revenue guidance on APAs, which says it will not discriminate against smaller taxpayers or against smaller transactions, he added.

A survey published by Big Five firm Ernst & Young in November revealed multinational companies were increasingly concerned about the issue.

The firm’s Global Transfer Pricing Survey said transfer pricing would continue to be the most important international tax issue facing multinational companies in the new millennium.

The survey found that 61% of almost 600 tax and finance directors interviewed regarded transfer pricing as the number one international tax issue.

More than half the companies surveyed revealed they had already been subjected to transfer pricing audits.

The OECD will be issuing guidelines on APAs shortly.

Paul Bowes argues small businesses deserve better from the Revenue

Transfer pricing to dominate international tax scene as authorities crack down, says survey

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