ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Tackling Transfer Pricing

In the complex set of transactions between the affiliates of multinational enterprises located in different countries, the valuation of such deals for taxation by the host country is a complicated matter. A discussion of the various models and practices and a consideration of what the United Nations can offer in this regard.

In the last few years, the question of what constitutes an equitable incidence of taxation has gained a very high profile within countries and internationally as well. One key aspect is the issue of what level of taxation of investment represents the appropriate balance between recognising an economic footprint or engagement in the taxing country that justifies a contribution to revenue, on the one hand, and acknowledging that too highly taxing such investments might deter the investors to the point that production is not carried out altogether.

Each country makes its own sovereign decisions on such matters, but there is increasing acceptance that governments need to work together more often and more deeply to ensure that such sovereign decisions are respected. This will lend support to the development of a country and its ability to gain fiscal and policy space. How countries cooperate to ensure appropriate taxation behaviour by the multinationals of one country in relation to another country will therefore be a test of how sincere this age of apparently greater international cooperation really is.

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