عمرو عادل فؤاد
05-01-2018, 11:43 PM
Abstract
Transfer prices play a significant role in determining tax burden of business units, especially multinational corporations which have to deal with different tax laws in different countries. As a result, multinational corporations face many problems with tax authority both locally and in the host countries.
To avoid these problems, many countries have identified specific methods to determine transfer prices to be used in preparing annual tax returns of multinational corporations. In addition, they have set fines to be imposed on those companies which try to avoid or evade taxes by using the transfer prices. As for the tax system in the Arab Republic of Egypt, it has been noted that the tax legislator did not identify the methods of determining the transfer prices and/or related fines if the taxpayers tried to avoid the applicable tax. Regarding these problems, the researcher recommends the following:
- Penalize multinational corporations which do not comply with accounting disclosure standards about their policies of determining transfer prices.
- Determining a mechanism to apply the neutral price (a transfer price) in pricing intercompany transactions between the multinational company and its subsidiary units to reduce the problems of tax accounting resulting from differences between tax authority and multinational companies about transfer prices.
- Minimizing the differences between the tax legislation and methods used to select the transfer prices.
- Determining and analyzing external and internal factors influencing the selection of transfer prices.
- Create an independent tax administration to handle transfer prices issues.
Transfer prices play a significant role in determining tax burden of business units, especially multinational corporations which have to deal with different tax laws in different countries. As a result, multinational corporations face many problems with tax authority both locally and in the host countries.
To avoid these problems, many countries have identified specific methods to determine transfer prices to be used in preparing annual tax returns of multinational corporations. In addition, they have set fines to be imposed on those companies which try to avoid or evade taxes by using the transfer prices. As for the tax system in the Arab Republic of Egypt, it has been noted that the tax legislator did not identify the methods of determining the transfer prices and/or related fines if the taxpayers tried to avoid the applicable tax. Regarding these problems, the researcher recommends the following:
- Penalize multinational corporations which do not comply with accounting disclosure standards about their policies of determining transfer prices.
- Determining a mechanism to apply the neutral price (a transfer price) in pricing intercompany transactions between the multinational company and its subsidiary units to reduce the problems of tax accounting resulting from differences between tax authority and multinational companies about transfer prices.
- Minimizing the differences between the tax legislation and methods used to select the transfer prices.
- Determining and analyzing external and internal factors influencing the selection of transfer prices.
- Create an independent tax administration to handle transfer prices issues.