During the sessions, panel members and participants with experience in the field of taxation shared their expertise and highlighted their concerns about this highly relevant topic that could break the corporate tax system.
The day started with an overview of the current state of the situation today, and gave an outline of the role of transfer pricing documentation. The two sessions depicted how a large quantity of information is required but not always read by revenue authorities. The conference heard that documentation has been labelled as ‘the plumbing of the transfer pricing process’ with another debate pointing out the disconnection between tax policy level at revenue and the tax inspector.
Participants expressed particular disapproval when the panel revealed that taxpayers are required to provide more information for internal transactions than for third-party transactions. The trust and transparency from the 2008 Cape Town report, published by the Organization for Economic Co-operation and Development Forum on Tax Administration, was shown to be absent in virtually all countries and transfer pricing documentation was also believed to have provided incorrect data to alter allocating profits of multinational enterprises between countries according to panellists.
Afternoon sessions dealt with the issues of documentation and dispute resolution, and options for a global model. The sessions concluded that “understanding of the business” by Revenues is prime with documentation coming second. One panel member noted that the ICC documentation template is successfully used by the Internal Revenue Service in the USA.
The closing session entitled: Future State – Where do we go from here? addressed the trade off between the burden of a high transfer pricing documentation and an attractive and competitive tax regime. The sentiment that an ever-increasing documentation burden cannot be continued was widely shared by participants because it creates an enormous and almost unbearable burden on both the taxpayer and the revenue authorities. There is no choice but to resolve this ever-increasing documentation burden to avoid breaking the corporate tax system, the conference heard. The ICC template and an improved knowledge of the business of the taxpayer are the first steps towards such a solution.
The ICC conference and the steps identified to take forward will help the ICC Taxation Commission in its mission to remove tax barriers globally.