OECD consults on developing countries transfer pricing toolkit

The OECD is seeking feedback on a draft toolkit designed to assist developing countries in work on transfer pricing, which specifically addresses the ways developing countries can overcome a lack of data on ‘comparables’, or the market prices for goods and services transferred between members of multinational corporations

The toolkit has been developed by the platform for collaboration on tax, a joint initiative of the OECD, IMF, UN and World Bank Group, and is one of a series of reports designed to help countries that may have limitations in their capacity to design or administer strong tax systems.

The OECD says helping developing countries build strong and credible transfer pricing regimes is an important part efforts to increase the capacity of developing countries to apply the principles of the Base Erosion and Profit Shifting (BEPS) project.

The draft toolkit examines how tax administrations can evaluate the correctness of the transfer prices set by multinationals when there is insufficient information available to governments on market-based transactions that are comparable to those reported by the multinational corporation, or comparables. The toolkit offers advice on making the best use of data that exists and options for monitoring the behaviour of multinational corporations in situations in which no data is available.

The discussion draft first seeks to put the search for potential comparables in context, emphasising the importance of accurately defining the transaction to ensure the subsequent search for comparables is as efficient and effective as possible. Next, sources of potential comparables data are considered, and practical tools such as step-by-step screening templates are suggested. To address situations where there is a systemic lack of comparables data, the draft considers potential policy options such as the development of safe harbours. The toolkit will also be available in French and Spanish.

In addition, since the pricing of transactions in the extractive industries is an issue of particular relevance to many low-income countries, the draft toolkit also addresses the information gaps on prices of minerals sold in an intermediate form.

The supplementary material on minerals pricing provides a systematic process that could be used by tax administrations to map the transformation chain for a particular mineral, identify key traded products and establish common industry pricing practices. Detailed case studies demonstrating the process are then provided for copper, gold, thermal coal and iron ore. The supplementary material is also available in French and will shortly be available in Spanish.

The platform partners are inviting public comments on the draft toolkit, including the supplementary material on minerals pricing by 21 February, with the aim of finalising it in the coming months.

Comments should be sent by e-mail to GlobalTaxPlatform@worldbank.org.

A toolkit for addressing difficulties in accessing comparables data for transfer pricing analyses is here.

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