Читать книгу Transfer Pricing in International Markets: Problems of Information Support - - Страница 1

Oleg Fedorovich Shakhov, Alexander Urevich Chernov, Olga Valenrievna Kalashnikova, Lola Dodohonovna Sanginova, Mairbek Abuevich Katsiev

Revised Manuscript Received on 30 July 2019.

* Correspondence Author

Oleg Fedorovich Shakhov*, Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, Russian Federation.

Alexander Urevich Chernov, Financial University under the Government of the Russian Federation (Financial University), Moscow, Russian Federation.

Olga Valenrievna Kalashnikova, Financial University under the Government of the Russian Federation (Financial University), Moscow, Russian Federation.

Lola Dodohonovna Sanginova, Financial University under the Government of the Russian Federation (Financial University), Moscow, Russian Federation.

Mairbek Abuevich Katsiev, Chechen State University, Grozny, Chechnya, Russian Federation.

© The Authors. Published by Blue Eyes Intelligence Engineering and Sciences Publication (BEIESP). This is an open access article under the CC-BY-NC-ND license http://creativecommons.org/licenses/by-nc-nd/4.0/

Abstract: The article characterizes the transfer pricing in international markets, analyzes the “arm’s length principle” as the main principle of taxation of interdependent companies, the motivation of transfer pricing participants, the main features of the transfer pricing practice, and the system regulating the transfer pricing at the interstate level. Based on analyzing various aspects of information support for the transfer pricing system, it has been proved that the best approach to improving it is to establish a permanent document flow to substantiate the level of transfer prices and to further draw up management, financial and tax reports. The novelty of the study consists in the recommendations on the sequence of actions to form a unified system of document flow, and management and financial accounting that would provide management with the information on all transactions with affiliates.

Index Terms: affiliates, controlled transactions, document flow, transfer price, transfer pricing.

I. INTRODUCTION

The concept of pricing is a key source of profit in the enterprise. Its formation depends on many factors. The development and evolution of the pricing concept are directly dependent on the economic and technological structure that prevails in the economy. In its turn, the economic environment is transformed under the impact of macroeconomic factors, including globalization that has the greatest impact.

Due to the increase in the globalization of the world economy and the expansion of the activities of transnational corporations (TNC), the number of transactions using the transfer pricing mechanism (hereinafter referred to as the TP) is increasing. Efficient TNC management involves not only the formation of a clear organizational structure of management, but also the development of efficient economic relations between its structural divisions.

However, the TP should not be associated only with the activities of large TNC. This mechanism of minimizing tax payments and international division of capital has started to be widely used even by small participants of international relations that establish their branches or representative offices abroad and use them as participants in transfer operations. This kind of activity has become characteristic of many Russian subjects of the international activity, which makes the study of the TP problem particularly relevant.

Against the background of the need to find an optimal variant of the economic independence of structural units, to clearly define the income and expenses of each unit of the enterprise, and to estimate its impact on the overall result of the activity, the problem of the study and use of TP is becoming more and more important. In this context, the problem of using TP at an enterprise touches on the processes of its information support in order to manage the results of the activities performed by the enterprise, and therefore is relevant.

Despite the fact that the issues related to TP are the object of the study in numerous scientific papers [1]–[6], a number of aspects related to the information support for TP are disputing and require additional study.

The purpose of the article is to characterize TP in international markets, to analyze the problems that exist in the information provision system in terms of TP management as applied to business partnership of enterprises, and as well as to offer recommendations on how to overcome them.

II. PROPOSED METHODOLOGY

A. Characteristics of Tp In International Markets

According to the OECD (Organization for Economic Cooperation and Development) Recommendations on TP [7], in the most general form, transfer prices are prices for internal corporate supplies, i.e., the prices that one of the economic centers and/or divisions sets for another center and/or a division of the same company or corporation.

The OECD Guidelines formulated so-called “arm’s length principle”. This is the principle of taxation of interdependent companies.

According to this rule, tax liabilities are calculated on the basis of market prices for transactions between interdependent taxpayers, as if companies were independent (“at arm’s length”). This principle has been adopted as a way to protect the state in obtaining taxes.

W.Cheng and D. Zhang comment on this international legal provision and emphasize that the attempt to regulate profits by specifying the terms and conditions to be achieved between independent enterprises in comparable transactions and under comparable circumstances (i.e., in “comparable noncontrolled transactions”) according to the “arm’s length principle” ensures the compliance with the approach to satisfying TNC members as if they were separate entities, and not inseparable parts of a single unified business. This is due to the fact that in such a case, the attention is focused on the nature of the transaction between these members and under the conditions that differ from those that will be recognized in comparable uncontrolled transactions. Such analysis of controlled and uncontrolled transactions is the core of applying the “arm’s length principle” [8].

It is necessary to note that the “arm’s length principle” can be implemented differently in national legislation. Taking into account this fact, there are several variants used by states. Firstly, this is the approach when this principle is explicitly expressed and normatively defined in the national legislation. Secondly, the principle under consideration may be expressed, but formally undefined in regulatory legal acts. Thirdly, there may be the situation when this principle is not expressed in the legislation, but related legal doctrines are applied. Fourth, some states do not legally enshrine the principle under consideration in law, but at the same time they empower tax authorities to adjust the income (profit) of taxpayers in order to display it correctly [8].