Transfer Pricing and Corporate Taxation

1. Front Matter

   Pages I-IX

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2. Introduction

   1. Front Matter

      Pages 1-1

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   2. Introduction

      • Elizabeth King

      Pages 1-4

3. Economic and Accounting Rates and Concepts Should Not be Conflated

   1. Front Matter

      Pages 5-5

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   2. Economic vs. Accounting Profit Rates

      • Elizabeth King

      Pages 7-10

   3. Overview and Critique of Existing Transfer Pricing Methods

      • Elizabeth King

      Pages 11-48

4. Alternative and Supplementary Approaches to Transfer Pricing

   1. Front Matter

      Pages 50-50

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   2. Some Alternative Approaches to Transfer Pricing

      • Elizabeth King

      Pages 51-64

5. Case Studies

   1. Front Matter

      Pages 65-65

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   2. Intercompany Sale of Diamonds

      • Elizabeth King

      Pages 67-88

   3. Intercompany Sale of Medical Devices

      • Elizabeth King

      Pages 89-100

   4. Performance of Intercompany Services

      • Elizabeth King

      Pages 101-114

   5. Replication of Internet-Based Business Model

      • Elizabeth King

      Pages 115-124

   6. Sale of Assets with Embedded Intellectual Property

      • Elizabeth King

      Pages 125-136

   7. Provision of CDN Services to Third Parties

      • Elizabeth King

      Pages 137-144

   8. Global Trading of Commodities

      • Elizabeth King

      Pages 145-160

   9. Decentralized Ownership of Intellectual Property

      • Elizabeth King

      Pages 161-179

6. Conclusions

   1. Front Matter

      Pages 181-181

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   2. Concluding Observations

      • Elizabeth King

      Pages 183-186

7. Back Matter

   Pages 187-194

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National tax authorities individually determine multinational ?rms’ country-speci?c tax liabilities by applying one or more sanctioned transfer pricing methodologies. These methodologies are founded on basic assumptions about market structure and ?rm behavior that are rarely empirically valid. Moreover, for the most part, the transfer pricing methodologies now in vogue were developed before the Internet became a dominant factor in the world economy, and hedge and private equity funds transformed ?nancial and commodities markets. For these reasons, multinational ?rms are unable to accurately anticipate their tax liabilities in individual countries, and remain at risk of double taxation. Uncertainties in corporate tax liability are extremely costly, both for individual corporations and from an economy-wide perspective. Firms pay exorbitant fees to have tax attorneys, accountants and economists prepare the documentation required by tax authorities to substantiate their intercompany pricing practices and defend their tax positions on audit. Corporate tax liabilities are also potentially much higher than they would be under a more transparent and predictable transfer pricing regime (due to the potential for double taxation and penalties), and investors’ returns are reduced accordingly. The FASB’s Interpretation No. 48, Accounting for Uncertainty in Income Taxes (released on July 13, 2006), has motivated multinational ?rms to increase their reserves substantially (in many cases at the insistence of their au- tors), reducing the total funds available for productive investment. 1 The current transfer pricing regimes are embodied in the OECD Guidelines, individual OECD member countries’ interpretations thereof, the U. S.

• corporate tax
• taxation
• valuation

From the reviews:

“The book of Elizabeth King is written for the benefit of tax practitioners. The focus is on the various transfer pricing cases. The case studies reflect in particular the US views as for example the FIN 48 specifications. We recommend this book to tax advisors and inhouse tax specialists handling transfer pricing aspects in particular related to the US.” (Steuern-buecher, September, 2012)

• Beecher Consulting, Brookline, USA

  Elizabeth King

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