Published in: European Taxation June 2014
In today’ s globalized economy, transfer pricing plays a key role. Over the years, as multinational corporations expanded their business at the global level, they were able to optimize their supply chain, hence increasing their profits boosting, overall, economic growth. This has, however, also created market distortions, which have increasingly brought transfer pricing and the related policies adopted by multinational businesses to the attention of the tax authorities.
A fundamental issue in the implementation of transfer pricing regulations is asymmetry between information in the hands of taxpayers and information held by the tax authorities. This divergence makes applying and complying with the arm’ s length principle less straightforward, favouring instead the realization of aggressive tax planning scheme.