The OECD on October 28 published comments received in response to its discussion draft, “Transfer Pricing Comparability Data and Developing Countries.”
The draft, released March 11, was prepared by the OECD Secretariat and the Task Force on Tax and Development to satisfy a G8 request for solutions to the lack of quality and availability of transfer pricing comparables in developing nations.
The comments include an appeal by the World Bank Group to the OECD to develop guidance on the use of foreign comparables, including their selection and adjustments for market differences. Though such guidance would be complex, “the need for practical guidance on this topic can no longer be ignored,” the World Bank Group said.
Tax and legal consulting firm, WTS, said the OECD should adopt a regional approach to performing comparability analysis. The OECD should initiate economic analyses and develop guidance to determine which countries and regions statistically can be considered to be homogenous geographic markets, WTS said.
AstraZeneca also supported broadening comparable searches to include uncontrolled transactions in the same industry but in different geographical markets. Permitting foreign comparables would lower compliance costs for MNE groups that operate though entities in different developing countries within a homogenous region, the company noted. AstraZeneca was also among several commentators that said that the OECD should discourage use of secret comparables for all purposes.
The United States Council for International Business noted the draft’s discussion of the pros and cons of requiring companies operating in developing nations to file and make public statutory accounts so as to increase the volume of comparable data. According to the USCIB, though, such proprietary information should remain confidential to prevent companies’ competitors from having access to it.
The USCIB also disputed portions of the draft that suggest that developing nations use alternative approaches to evaluating transactions in the absence of comparables, including the application of economic analysis, value chain analysis, or the use of the “sixth method.” None of these measures is appropriate because they lack definition and because they only by chance produce results that are consistent with the arm’s length standard, the USCIB wrote.
The following 24 comments were released:
Astra Zeneca, BMG, Deloitte, EY, Flick Gocke Schaumburg, KPMG, PT Consultores, Rödl & Partner, SAB Miller, Siemens, United States Council of International Business (USCIB), BIAC, CBI, Diaz Tax, FIDA, IFA, NERA, PWC Global, RoyaltyStat, World Bank Group, Standard Chartered Bank, Taxand, VNO-NCW.
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