The Coming Wave of Transfer Pricing Audits and Adjustments: Country by Country Developments

May 2, 2018

The Coming Wave of Transfer Pricing Audits and Adjustments: Country by Country Developments

~3-minute read. This article highlights discusses the rising trend of audits and adjustments in the global transfer pricing landscape. 

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Since the global financial crises, governments around the world have seen public finances come under pressure. Media scrutiny of the tax contributions made by businesses has intensified. When combined with the wave of nationalism that has washed over the shores of most countries, multinational corporations have become a politically expedient target. They have come under fierce scrutiny in terms of whether or not they pay their “fair share” of taxes in each jurisdiction where they operate.

Governments have responded to this steady beat of public pressure by drawing up a host of potent new laws and guidelines that are designed to shore up their revenue base. Transfer pricing has become the weapon of first resort for countries that are trying to raise revenue without impacting purely domestic taxpayers.

Traditionally, tax authorities have not fully utilized the capabilities afforded to them under new tax guidelines. Unfortunately, this is no longer the case in the transfer pricing arena. Governments are putting their money where the mouths are and have budgeted revenue windfalls to be derived from transfer pricing audits and adjustments. Moreover, in an effort to ensure that these revenue goals are actually realized, the budgets of tax authorities have been increased exponentially to hire the resources necessary to reach their goals.

The end result is that tax authorities throughout the world are gearing up to generate significant amounts of revenue from transfer pricing adjustments. Based on early indications, multinational corporations have real reason for alarm. Already examinations and corresponding transfer pricing assessments have begun to dramatically increase. In fact the early assessment amounts are staggering in their size and breadth. Below are some country by country examples:

  • The Belgium transfer pricing investigation team has increased their headcount by 40% in 2017.
  • Transfer pricing assessments in Canada were $478M in 2017 as compared to $58.6M in 2012.
  • In the United Kingdom, in 2017 transfer pricing assessments were 1.6B which was a 50% increase from the previous year.
  • In China, transfer pricing adjustments increased three fold in 2017 when compared against 2016.
  • Australia has increased the resources devoted to transfer pricing by 43% (AUD $678M and 390) professionals.

 

For more details on how MNCs are coping with the new transfer pricing compliance environment, fill out the form below to download our 2016-2017 Transfer Pricing Audits and Adjustments Survey.

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Header Three

Since the global financial crises, governments around the world have seen public finances come under pressure. Media scrutiny of the tax contributions made by businesses has intensified. When combined with the wave of nationalism that has washed over the shores of most countries, multinational corporations have become a politically expedient target. They have come under fierce scrutiny in terms of whether or not they pay their “fair share” of taxes in each jurisdiction where they operate.

Governments have responded to this steady beat of public pressure by drawing up a host of potent new laws and guidelines that are designed to shore up their revenue base. Transfer pricing has become the weapon of first resort for countries that are trying to raise revenue without impacting purely domestic taxpayers.

Traditionally, tax authorities have not fully utilized the capabilities afforded to them under new tax guidelines. Unfortunately, this is no longer the case in the transfer pricing arena. Governments are putting their money where the mouths are and have budgeted revenue windfalls to be derived from transfer pricing audits and adjustments. Moreover, in an effort to ensure that these revenue goals are actually realized, the budgets of tax authorities have been increased exponentially to hire the resources necessary to reach their goals.

The end result is that tax authorities throughout the world are gearing up to generate significant amounts of revenue from transfer pricing adjustments. Based on early indications, multinational corporations have real reason for alarm. Already examinations and corresponding transfer pricing assessments have begun to dramatically increase. In fact the early assessment amounts are staggering in their size and breadth. Below are some country by country examples:

  • The Belgium transfer pricing investigation team has increased their headcount by 40% in 2017.
  • Transfer pricing assessments in Canada were $478M in 2017 as compared to $58.6M in 2012.
  • In the United Kingdom, in 2017 transfer pricing assessments were 1.6B which was a 50% increase from the previous year.
  • In China, transfer pricing adjustments increased three fold in 2017 when compared against 2016.
  • Australia has increased the resources devoted to transfer pricing by 43% (AUD $678M and 390) professionals.

 

For more details on how MNCs are coping with the new transfer pricing compliance environment, fill out the form below to download our 2016-2017 Transfer Pricing Audits and Adjustments Survey.

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