Transfer Pricing: Concepts and Practices of the ‘Sixth Method’
Global Alliance for Tax Justice’s committed partner South Centre just published a new Policy Brief from its New Policy Brief Series on Tax Cooperation.
This Brief No. 2 is entitled "Transfer Pricing: Concepts and Practices of the ‘Sixth Method’ in Transfer Pricing" and was written by Veronica Grondona, Advisor to European United Left/Nordic Green Left (GUE/NGL) on the European Union Parliament Inquiry Committee on Panama Papers.
The brief can be downloaded here.
“Many developing countries, the South Centre introduces, are particularly concerned with problems of transfer pricing in the extractive industries, which are often significant components of their economies. Similar to other sectors, profit attribution may be highly dependent on the valuation of commodity exports. For this reason, a number of developing countries have adopted the ‘Sixth Method’, following the Argentine experience. This method aims to establish a clear and easily administered benchmark and avoid the need for subjective judgment and discretion”.
“However, even when the application of the Sixth Method is legislated for, and given Argentina’s extended experience dealing with commodity mis-invoicing, the data shows that such practices are still being employed by multinational companies”.
This policy brief analyses the problem of the valuation of commodities, actual policy experience and the policy’s impact and the lessons learned.
This brief is part of the South Centre’s policy brief series focusing on tax policies and the experiences in international tax cooperation of developing countries.
“Efforts to reform international cooperation in tax matters are exhibiting a distinct acceleration. The direction of change must recognize and incorporate innovations in developing country policies and approaches, otherwise the outcomes will obstruct practical paths to development”.
The policy brief series is intended as a tool to assist in further dialogue on needed reforms.