Simplified Application of the Arm’s Length Principle for Baseline Distribution Functions offers win/win for MNEs and Tax Authorities - A Risk Management Perspective on the OECD Amount B Proposal

8 Pages Posted: 28 Sep 2023

Date Written: September 5, 2023

Abstract

The complexity of transfer pricing regulations is a severe challenge for tax authorities and MNEs. In the context of the OECD BEPS project policymakers and stakeholders had to navigate complex technical tradeoffs. In the context of the Amount A reforms such complexities were largely attributable to the necessity of balancing opposing interest in a zero-sum game. Designing a streamlined Amount B, however, does not constitute a zero-sum game. Consequently, the mandate for Amount B, namely streamlining the application of the AR's length principle for baseline distribution functions, can only be attained when eliminating complexities as far as possible. In this paper, which was submitted in the OECD consultation process, we discuss a risk management perspective to evaluate tradeoffs implied in determining the scope and thresholds for applying Amount B. We illustrate that such an assessment framework to assess tradeoffs will address the needs of low-capacity jurisdictions (LCJs) and facilitate a positive outcome for taxpayers.

Keywords: Transfer Pricing, Amount B, OECD, Benchmarking, Risk Adjustments, TNMM, Profit Split, Functional and risk Analysis

JEL Classification: G30, G38, K34,

Suggested Citation

Treidler, Oliver and Kunz, Tom-Eric, Simplified Application of the Arm’s Length Principle for Baseline Distribution Functions offers win/win for MNEs and Tax Authorities - A Risk Management Perspective on the OECD Amount B Proposal (September 5, 2023). Available at SSRN: https://ssrn.com/abstract=4562384 or http://dx.doi.org/10.2139/ssrn.4562384

Oliver Treidler (Contact Author)

TP&C ( email )

Ravensberger StraB2 14
Berlin, 10709
Germany

Tom-Eric Kunz

TP&C ( email )

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