Double taxation is the spectre that stalks the battlefield of
transfer pricing disputes which cannot be satisfactorily
resolved.
Many countries view the OECD Transfer Pricing Guidelines for
Multinational Enterprises and Tax Administrations as the
ghostbuster most likely to succeed in banishing the spectre for two
reasons:
- They present a way of determining a fair allocation of
multinational profit between countries and should avoid
manipulation for unfair tax advantage.
- They provide procedures whereby disputes that arise can be
resolved cost-effectively with a reasonable degree of
predictability.
It is hoped that a combination of the use of the OECD guidelines
together with mutual agreement procedures
(“MAPs”) in treaties, advance pricing
agreements (“APAs”) and more recently,
arbitration will provide the solution. Only time will tell whether
this combination will prove to be the best route to follow.
