Transfer Pricing and Value Creation

1. S. 421Introduction

The consumer products sector has created and is dominated by some of the mightiest organizations in the world catering to a competitive and global market. Typically, consumer products organizations have various related entities scattered across the globe and fulfill diverse tasks. Also, consumer products organizations own and employ exceptionally valuable intangible assets (especially brands and know-how).

Furthermore, today, the sector is in the midst of reinventing itself structurally due to the forces triggered by increasing automatization and digitalization. Those forces impact internal processes by enabling fundamentally new possibilities of creating value and, at the same time, change consumer behavior and consumers’ level of information.

Those trends deeply impact the traditional value chain leading to a reallocation of risks, functions, and assets between the primary activities of a typical consumer products organization.

The fundamental characteristics (global presence, fragmented structures consisting of many related entities, etc.) of the sector already create an enormous potential for transfer pricing issues to arise. This potential is further increased by t...