The press is full of stories about multi-national companies being challenged on their tax arrangements. The stories continue as regulators tighten up on reporting requirements and companies continue to struggle to keep up and to fully explain their position, whilst also managing the negative PR.
Is your Transfer Pricing process efficient and ready to meet tightening up of regulation? Here are some questions that you should ask before answering this question.
Is there a robust process in place and is data readily available to support growing regulatory and reporting needs?
Do you use the latest technology or still rely on spreadsheets?
Is there a common methodology and process across legal entities within the group? Or does each country have its own way?
Are the calculations needed to answer queries ad hoc, and do you struggle to collate the supporting data?
How long does it take for Finance/Tax departments to transform general ledger data, so that it is fit to use for transfer pricing purposes?
Can you monitor ‘profit level Indicators’ on a constant basis or just before year end?
Does this result in large ‘true up’ adjustments and an adverse effect of VAT and custom duties that cannot be claimed back?
Are the calculations used for transfer pricing purposes transparent and traceable?
If you have concerns about your answers to these questions, rest assured you are not alone. Whilst other performance management processes have already leveraged latest technology to drive business improvement and secure profitability, what we are seeing at Profit& is that tax transfer pricing has lagged. However, increasing demands from regulators is driving rapid change in this area.
Next time I’ll put the spotlight on transparency of transfer pricing. This is typically a challenge for tax given the current over reliance on spreadsheet models.