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Pipe Dream # 5: Can we recognize that not all intellectual capital is housed in the US? Or, can we take the future of our country into account in devising tax laws relating to transfer pricing?
Departing from transfer pricing for a bit, one of my concerns has long been the future of the US economy. With manufacturing jobs leaving the US in droves (due, at least in part, to the differences in the cost of labor), and with R&D jobs in jeopardy (due to declining US educational standards and the oppressive US tax law), what is our future? I was reading a book written by Bob Lutz, “Car Guys vs. ...
Pipe Dream # 4: Can we get back to the arm’s length standard?
The US pioneered the application of the arm’s length standard to transfer pricing (although the Germans might argue with that), and it seems to be pioneering the move away from that standard now. It is hard to know how that happened -- my own personal view is that the powers-that-be in Washington needed revenue raisers and this was a great way to get it from corporations. That may be too harsh, I’m not sure, but ...
Pipe Dream # 3: Can we raise the bar on the type/quality of analysis?
Dealing with IRS, or with taxpayers, in transfer pricing audits can be very frustrating. Today, we routinely have accountants practicing economics, economists practicing law (and, I truly love doing it!!! Not that I should, you understand, but it is fun), and lawyers practicing both economics and accounting. This means that the analysis is not necessarily that good. And, I’m not convinced that this approach to transfer pricing issues has served either side (taxpayer or tax ...
Pipe Dream # 2: Can we get better, less biased economic opinions?
Closely related to my first pipe dream, I note that IRS has been hiring economic experts to help with audits. Theoretically, this is a great idea because it should help transfer knowledge from the consulting community to the IRS field economists. In concept, I have been, and continue to be, highly supportive of the practice. If, however, the outside consultants are hired merely to put into writing the position that the field wants to take, ...
Pipe Dream # 1: Are reasonable positions still inappropriate?
IRS Director of Transfer Pricing Operations Samuel Maruca was quoted by Tax Management’s Transfer Pricing report (June 16, 2011, p. 152), that “IRS must ‘produce some winners’ to improve its credibility in the transfer pricing arena to restore balance to a system in which both sides too often take unrealistic positions.” I know that this is typically the way that litigation is handled, but it seems fairly clear (at least to me) that this approach hasn’t ...
