Transfer Pricing
Transfer Pricing in Developing Countries An Introduction
Topics
1. Abstract 2. International tax law & its sources 3. Brief history of International Tax Law 4. Who gets the pie? 5. Arm 's length principle : Cornerstone of International Tax Law 6. Transfer pricing methods 7. Problems with of source taxation of MNE 's 8. Internet & e-commerce : Achilles heel of current International taxation regime? 9. Formulary Apportionment (FA) 10. Existing uses of Formulary Apportionment systems in the world 11. Developing countries & Formulary Apportionment 12. Critique of Formulary Apportionment 13. Transfer pricing and Formulary Apportionment : One continuum 14. Conclusion 15. Acknowledgements 16. References
Section 1 Abstract The aim of this paper is to highlight thoroughly the problems with the current approach and practice of MNE (cross-border) taxation in general and in particular the transfer pricing methods which are used to derive an arm 's length price. Further, it is substantiated as to why Formulary Apportionment (FA) should be considered as an alternative to the currently recommended transfer pricing methods, especially for developing countries. Background To understand how to move forward we first need to understand how we got here. In the next two sections we take a look at the development of international taxation and understand how the current approach of using Arm 's-length prices for transactions came into being. We refer readers who are interested in tracing the history of international tax further to Jinyan Li 's in-depth introduction[1] from which we have quoted key passages below.
Section 2 International Tax Law & its sources Taxes on international income are imposed by national tax laws[1]; “there is no global body which imposes income taxes; in that sense the term International Tax Law really refers to the tax treatment of international transactions”[2] In reality International tax law is “domestic law rules of a given state applied to
Topics
1. Abstract 2. International tax law & its sources 3. Brief history of International Tax Law 4. Who gets the pie? 5. Arm 's length principle : Cornerstone of International Tax Law 6. Transfer pricing methods 7. Problems with of source taxation of MNE 's 8. Internet & e-commerce : Achilles heel of current International taxation regime? 9. Formulary Apportionment (FA) 10. Existing uses of Formulary Apportionment systems in the world 11. Developing countries & Formulary Apportionment 12. Critique of Formulary Apportionment 13. Transfer pricing and Formulary Apportionment : One continuum 14. Conclusion 15. Acknowledgements 16. References
Section 1 Abstract The aim of this paper is to highlight thoroughly the problems with the current approach and practice of MNE (cross-border) taxation in general and in particular the transfer pricing methods which are used to derive an arm 's length price. Further, it is substantiated as to why Formulary Apportionment (FA) should be considered as an alternative to the currently recommended transfer pricing methods, especially for developing countries. Background To understand how to move forward we first need to understand how we got here. In the next two sections we take a look at the development of international taxation and understand how the current approach of using Arm 's-length prices for transactions came into being. We refer readers who are interested in tracing the history of international tax further to Jinyan Li 's in-depth introduction[1] from which we have quoted key passages below.
Section 2 International Tax Law & its sources Taxes on international income are imposed by national tax laws[1]; “there is no global body which imposes income taxes; in that sense the term International Tax Law really refers to the tax treatment of international transactions”[2] In reality International tax law is “domestic law rules of a given state applied to