Tax Policy Challenges in the 21st Century

S. 331I. Introduction

In the recent past, transfer pricing was a concern only for tax administrations and a few other specialists. However, this subject has today gained the attention of all tax practitioners around the globe, as there are no countries, whether developed or developing, that are willing to have their tax base suffer due to transfer pricing rules. As a part of economic globalization, the number of multinational enterprises and the volume of cross-border transactions between entities belonging to the same company group (related parties) has grown and transfer pricing has started to play an important role in world trade and in the economy. The significance of this discipline is made even more relevant because, according to the OECD, 60% of world trade is undertaken within multinational enterprises.

A short while ago transfer pricing experts primarily concentrated on corporate income tax, and worked alongside direct tax advisors. Over time it has been recognized that transfer pricing issues can possibly affect two of the most predominant indirect taxes: value added tax and customs duties. The taxpayers, revenue and customs authorities face an increasing challenge in assessing a...