By 2002, more than 20 countries had done so, and this number is expected to continue to grow.
Since
about 50% of global exchanges are usually considered as intercompany
exchanges, it is legitimate that tax authorities expect taxpayers to
document their transfer pricing from both a tax and an economic
perspective.
However, as transfer pricing is a global issue for
multinational enterprises, taxpayers expect in return that tax
authorities deal with that issue in a uniform manner that will prevent
international double taxation.
The ever increasing and diverse
documentation requirements are a result of separate and uncoordinat ed
requirements by tax authorities.
For taxpayers with international
transactions, and in particular multinational enterprises, this leads to
an inappropriate, unnecessary and very costly compliance burden.
It is common for tax authorities to deal with the same issues in different ways.
Some frequent, non-exhaustive examples of different local treatment of the same issue are:
- capital risk allocation between manufacturer and distributor;
- entrepreneur (risk-taker) function allocation between intangible owner, manufacturer and distributor;
- separation (or non separation) of the capital function from the trading function in financial and non-financial trading operations;
- allocation of the local market penetration risk and rewards;
- separation (or non separation) of intangible compensation from underlying tangible transactions;
- set off between symmetric transactions;
- use of profit methods and related adjustments; and
- remuneration for the use or transfer of intangible property.