Transfer pricing 'high risk'

News Article - Friday, December 14, 2007

filed under: Business, Regulatory

The increasing compliance requirements in financial reporting have led to a growth in the risk of transfer pricing, it has been found.

Ernst & Young's Global Transfer Pricing Survey revealed that 87 per cent of multinational enterprises (MNEs) believe transfer pricing to be a risk when managing financial statements.

"Companies need to manage their financial risks with greater precision, as enhanced transfer pricing documentation requirements have intensified the responsibilities of MNEs to actively report and justify the impact of their tax position," commented John Hobster, Ernst & Young's global accounts leader of transfer pricing.

According to the survey, around half of all pharmaceutical and telecommunication companies believed the issue to be of high risk and 53 per cent claim the cost of complying with transfer pricing regulations has increased, compared to 29 per cent in 2005.

One in five companies claimed to have had customs valuations based on transfer prices for goods challenged.

A study by PricewaterhouseCoopers has found that 49 per cent of multinational companies have not considered how a Common Consolidated Corporate Tax Base will affect their business, a standard which would lower compliance costs and reduce transfer pricing issues.

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