Dispute Prevention Techniques – Making A Case For Advanced Pricing Arrangements In Nigeria

Introduction

The prevalent use of tax avoidance strategies such as Transfer Pricing (TP) by multinational enterprises (MNEs) has become a major international taxation issue in recent years. By making use of several tax shifting accounting manipulations, MNEs attempt to exploit differences in marginal statutory tax rates across countries where they have subsidiaries and associate enterprises for the purpose of adjusting their profits based on their cross-border transactions. Since MNEs may try to divert their profits from high tax jurisdictions where they operate into low tax jurisdictions or tax havens through TP tactics, national tax authorities have initiated tax audits on MNEs for the purpose of verifying whether the pricing of controlled transactions are in line with the arm's length principle and other tax and regulatory provisions of the country. TP audits are therefore used by tax authorities to review the TP returns, documents, financial and