Transfer Pricing and Value Creation

1. S. 504Introduction

Transfer pricing and value creation in the pharmaceutical industry is a very generic concept. There are different set of value creators and the rules of transfer pricing differ within the industry in relation to the size of the industry. This chapter is on transfer pricing in the pharmaceutical multinationals that have presences across various jurisdictions and in such situations transfer pricing tax issues are an important issue.

The aim of this chapter is to highlight the changing landscape of the way pharmaceutical companies have been doing business and the current business models that they have adopted as a result of challenging issues. Post the 2008 financial crises, there were calls from G20 members countries to address the issue of tax avoidance and the OECD under the BEPS initiative laid guidelines for transfer pricing. The main aim of the initiative was to target artificial shifting of profit to other jurisdictions in order to obtain the maximum tax advantages.

Big pharmaceutical companies have a global presence that has maximised their ability to divert profit and are now faced with the task of addressing transfer pricing tax issues. There is no doubt that tr...