Source: The Tax Specialist Journal Article
Published Date: 1 Aug 2022
The increasing flow of international transactions, the complicated integration of multinational group activities and sophisticated tax planning makes the task of addressing transfer pricing risks to the domestic tax base more dynamic. This article reviews the landscape 40 years after Australia's first iterative reform effort.
It was in 1982 that a significant change was made to Australian domestic tax to introduce a transfer pricing division (Div 13 of the Income Tax Assessment Act 1936 (Cth)), which ensured that international transactions were benchmarked against arm's length pricing, in step with the Organisation for Economic Co-Operation and Development consensus transfer pricing guidelines that have served to regulate tax approaches across jurisdictions.
Any single country will find impediments to tackling global tax risks unilaterally, due to the narrowness necessarily involved in crafting territorial laws to meet international problems. Domestic tax policy cannot trust that international consensus solutions alone will work effectively, without overlaying domestic economic considerations and having access to sufficient information for the enforcement of global multinational compliance.
After years of tax reforms trying to keep abreast of multinationals' cross-border transactions and profit allocations, how well have we progressed? How has the tax system evolved to meet the transfer pricing challenges of today? It has been a long road to try to curb the extremes of global profit shifting practices, with practical issues continuing to persist.
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