US will aggressively defend transfer pricing position through litigation, IRS Commissioner says

By Julie Martin, MNE Tax

Despite a recent string of court losses involving transfer pricing disputes with taxpayers, the IRS will continue to vigorously defend US interests in this arena, IRS Commissioner Charles P. Rettig said December 13 at the 31st Annual Institute on Current Issues in International Taxation, held in Washington, DC.

“If we bring five transfer pricing cases and the courts tend to rule against us in five cases, I am not a commissioner that thinks we lost, I am going to wonder why we did not do 10, 15,” said Rettig, a former tax litigator. 

According to Rettig, if taxpayers know that the IRS will fight aggressive transfer pricing positions, they will modify their behavior.  “A win for me is when the community tightens it up a little bit, [providing] better economic reports, etcetera,” he said.

“That’s the game we are playing going forward — future compliance,” the IRS Commissioner said.

Rettig cited the heightened tax shelter activity of the 1980s as an example of a period when “the IRS was on its heels” and taxpayers took increasingly more aggressive positions. “That is not going to happen on my watch,” he said. 

He also noted that the IRS is often unable to retain the experts needed to defend transfer pricing cases in court.

Further, revealing his background as a tax litigator, Rettig stated that the IRS’s objective is not to win in Tax Court but to win on appeal. 

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Julie Martin

Founder & Editor at MNE Tax

Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.

Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.

Julie can be reached at [email protected].

@mnetax

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Julie can be reached at [email protected].