Why Transfer Pricing Should Be on Your Radar and Isn ’ t Just for Big Business
By Gordon McGuinty
Gordon McGuinty is a transfer pricing manager with the Vancouver office of PwC Canada , and is currently on secondment to the Rotterdam office of PwC Netherlands . He thanks Elisabeth Finch , a tax services partner based in PwC ’ s Vancouver office , for her contributions to this article . solarseven / iStock / Thinkstock
Globalization isn ’ t new . The interaction of countries and , consequently , of their economies , has benefited the world since the early 20th century . Notwithstanding Brexit and the agenda of President Trump , the last few decades can be characterized by the increasing pace of cross-border economic integration . The global movement of capital and workers , the shift of production from high-cost countries to low-cost “ economic zones ,” and the gradual collapse of trade barriers facilitated by advancing communication technologies have had a significant impact on how cross-border activities are conducted . 1 Given that approximately two-thirds of all global business transactions occur among companies within the same multinational groups ( i . e . related parties ) 2 , transfer pricing is an important issue for multinational companies big and small .
What is transfer pricing ? Transfer pricing is a term used to describe how a group of related companies prices or values its intercompany / intragroup transactions . These transactions can include transfers of intangible property , tangible goods , or services — as well as loans or other financing transactions — which can occur across local , state , or international borders . Each jurisdiction , primarily at the national level , asserts its right to tax income generated by each local related party .
1
See : OECD ( 2013 ), Action Plan on Base Erosion and Profit Shifting , OECD Publishing , dx . doi . org / 10.1787 / 9789264202719-en .
2
Rajul Awasthi for World Bank Group , “ Transfer Pricing Technical Assistance Global Tax Simplification Program ,” presentation given at a meeting of the European Commission and the International Tax Compact in Brussels on February 24 , 2011 , taxcompact . net / documents / WB-IFC-TP-RA-ITC-EU-event _ Feb-2011 . pdf .
36 CPABC in Focus • Mar / Apr 2017