The Inevitable New Era of Transfer Pricing

Reading time: 3 minutes | December 3, 2019 | by Túlio Lira

Tax legislation changes more often than new smartphones come to the market and new regulations deeply impact multinationals enterprises (“MNEs”) when it comes to compliance. A group‘s ability to comply with its tax work (country-by-country report, BEPS, OECD transfer pricing regulations…) nowadays claims long working hours and extremely capacitated personnel, above all, in the transfer pricing field.  


Especially in transfer pricing, such regulations have evolved to require always further transparency from big enterprises (vide BEPS actions 8-10 and 2017 guidelines). Meanwhile, the tax authorities‘ level of scrutiny only increases.


Keeping the pace has become a difficult trade, and speed is not a commodity easily achievable for most MNEs. This is due to several factors: consistency of information, excessive complexity in internal processes, lack of system unity or global organizational standards; plus, much of the transactional activities and controls happen manually and at a local level. Consequently, the group ends up with inaccurate or improper documentation and that can only lead to double-taxation, fines, and ultimately additional losses.


MNEs rely on their able body of tax professionals to mitigate such risks through thorough tax analysis that more often than not involves intensive manual tasks with extended hours behind word editors and polished excel sheets. A benchmark evaluation alone could take days of work before returning the quartile numbers for the TP studies. All to generate the desired eye-candy to facilitate tax authorities‘ assessment.


A significant percentage of reserves reported by MNEs relates to their transfer pricing position. Being able to expedite transfer pricing analysis and processes would not only help in a managerial sense but also economically.


This is where technology steps as the breaker of chains. And I mean technology not merely in the general sense (computers, software, tablets); technology in and for the transfer pricing field. Specially designed software, intertwined with some level of AI, is the present “weapon of the future.” In other words, it is time to start walking beyond the current technological limitations we know today: become specific, specialist.


It was with that mentality that TaxModel decided to pioneer in the field, introducing what we believe to be the first step in high-efficiency specialized tools for TP professionals: TPbenchmark and TPdoc. So far, we had readings indicating that new users have decreased their benchmarking producing time in about 33%!


A significant step in the right direction. This is where all companies should be heading.


Maximizing efficiency and quality with specialized tools for TP is to go beyond the mere preoccupation with documenting existing policies (which already is enough time-consuming). It signifies power and control of a group‘s processes: put policies to the test; prepare and adapt with ease.


Such is the aim of TaxModel – among some other companies in the field, of course. It is all a matter of transitioning to the new standards of taxation, and when they do, we‘ll be waiting.