Policy Forum: The End of Transfer Pricing?

Robert Couzin ()
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Robert Couzin: Couzin Taylor LLP, Toronto, allied with Ernst & Young LLP

Canadian Tax Journal, 2013, vol. 61, issue 1, 159-178

Abstract: This article is based on a lecture delivered at the NYU School of Law in September 2012. It puts into question the viability of the prevailing model for the allocation of income within a multinational enterprise (MNE), the system of transfer pricing based on the arm's-length principle. The author likens transfer pricing to a scientific "paradigm" as discussed by the historian of science Thomas Kuhn, suggesting that its perseverance is due especially to the entrenched interests of its practitioners in both government and the private sector. At the theoretical level, transfer pricing suffers from a conflict with the reality of the MNE; in practical terms, it is challenged in particular on the grounds of complexity and the attendant cost of administration and compliance. The author briefly canvasses possible solutions to the impasse, focusing on profit splits and formulary apportionment.

Keywords: Transfer pricing; policy; international taxation; multinationals; allocation; apportionment (search for similar items in EconPapers)
Date: 2013
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