Possibilities for improving transfer pricing procedures

87 Pages Posted: 18 Jun 2024

See all articles by Annalena Form

Annalena Form

University of Goettingen (Göttingen)

Andreas Oestreicher

University of Goettingen (Göttingen)

Date Written: October 04, 2021

Abstract

In view of the indeterminacy of the arm's length principle, the fulfillment of tax obligations in the area of transfer pricing is dependent on efficient taxation procedures. This study examines the question of where possible deficits in compliance with tax regulations lie in the area of tax transfer pricing, what the reasons for these are and whether tax compliance can be strengthened through trust in appropriate administrative action. It is based on semi-structured interviews with German representatives of companies, their advisors and members of the tax authorities. Our analysis of transfer pricing procedures in Germany shows a discernible build-up of competence and resources, particularly at the level of the federal authorities, as well as the development of cooperative dispute prevention and resolution programs. Nevertheless, there are still shortcomings in all phases of transfer pricing procedures: in particular, cost-intensive reporting obligations and the continuing pressure to reach an agreement in the tax audit phase have a counterproductive effect. An improved focus of administrative action on early tax certainty and greater effectiveness of intergovernmental procedures (compliance programs, joint audits and mutual agreement procedures) would be helpful. The greater use of procedural law to implement transfer pricing for taxpayers with cross-border activities is proportionate if there is a mirror image of relief for these taxpayers through instruments to protect confidence and disposition.

Keywords: tax transfer pricing, tax compliance, uncertainty, tax procedures

JEL Classification: H25, H26, J52, K34

Suggested Citation

Form, Annalena and Oestreicher, Andreas, Possibilities for improving transfer pricing procedures (October 04, 2021). Available at SSRN: https://ssrn.com/abstract=4862817 or http://dx.doi.org/10.2139/ssrn.4862817

Annalena Form

University of Goettingen (Göttingen) ( email )

Andreas Oestreicher (Contact Author)

University of Goettingen (Göttingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

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