By Robert Feinschreiber, Charles River Associates & Margaret Kent, Transfer Pricing Consortium
The Inter-American Center of Tax Administrations (CIAT), on July 15, released comprehensive and detailed proposals aimed at preventing abusive transfer pricing in low-income countries and in countries on the path to development.
The 110-page transfer pricing directive was developed over a three year period and reflects the broad consensus of the CIAT community, comprised of 42 county tax administrations, including all Latin American country tax administrations.
The CIAT document, titled “Coctel de medidas para el control de la manipulation abusiba de precios de transferencia, con enfoque en el contexto de paises de bajos ingresesos y en vias de Desarrollo,” at present is available only in Spanish.
The CIAT transfer pricing proposals examine a new best method selection process and government methods for dispensing with inferior selection alternatives. CIAT ascertains size criteria that shift income to tax havens and governmental alternatives. In addition, the CIAT document examines “geographic” adjustments and parameters.
The three authors of the CIAT consensus directive are Carlos Perez Gomez Serrano, Enrique Bolado Munoz, and Isaac Gonzalo Arias Esteban.
The primary financial sponsor for CIAT’s transfer pricing consensus directive is GIZ, the Deutsche Gesellschaft fur Internationale Zusammenarbeit, GmbH. This entity is the German Cooperation for International Cooperation, headquartered in Bonn and in Eschborn. Germany’s Federal Ministry for Economic and Development initiated GIZ in 2011.
CIAT ultimately selected 17 well-accomplished transfer pricing experts in 2017 to guide CIAT in developing and enhancing its transfer pricing audit techniques. CIAT selected Margaret Kent and Robert Feinschreiber as their United States representatives. The experts expanded and then honed down their transfer pricing objectives.
CIAT’s objective in 2018 was to achieve a consensus directive among the 42 country participants. The CIAT countries met together to discuss transfer pricing directive options in Antigua, Guatemala in 2018.
Certain CIAT countries are moving ahead from the consensus directive without requiring further legislation. We anticipate that knowledgeable transfer pricing professionals will begin advising enterprises to prepare themselves against transfer pricing tax penalties. The conference directive is certainly making transfer pricing tax planning more important and making tax malpractice suits against wayward tax preparers more likely.
CIAT, the Centro Interameriano de Administraciones Tributarias, began 52 years ago to focus on transfer pricing and other issues in Central America. CIAT countries are in the process of enhancing their transfer pricing audit techniques and strategies when dealing with multinational enterprises.
CIAT expanded from Central America to include all Latin American countries and virtually countries in the Americas comprising 99 percent of America’s landmass. CIAT’s reach extends to Europe, Africa, and Asia and its members include Mexico, Argentina, Brazil, Colombia, the United States, and India. All CIAT members are UN members. In addition, some CIAT countries are OECD members, and some CIAT members are G20 members.
– Robert Feinschreiber is with Charles River Associates, Key Biscayne, Florida.
– Margaret Kent is with Transfer Pricing Consortium, Key Biscayne, Florida.
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