India among the top three nations where transfer pricing policies faced official examination: EY Survey

Companies will need to become comfortable with sharing more tax data with authorities far and wide. More jurisdictions having unfettered access to more data will lead to heightened focus on transfer pricing and greater risk of controversy.

An EY survey on transfer pricing says that in this era of increased transparency, reputational risk is increasingly at stake. Companies might even want to consider sharing more, not less, tax information. To the extent an enterprise can do a more thorough job in educating the public and other stakeholders about the contributions made via tax, it may be able to turn a potential negative into a strong positive.

The report warns that there's going to be more scrutiny in future than ever of how companies' transfer pricing model aligns with the operating model.
Highlights of survey results are as below:

 

• Survey respondents are encountering significantly more transfer pricing disputes in more jurisdictions than in the past.
• 75 per cent of the businesses identify tax risk as top transfer pricing priority. Number of firms has surged from 66 per cent in 2013.
• The top three most frequently cited nations where transfer pricing policies have faced official examinations are- Germany (29 per cent), US (25 per cent), India (25 per cent).
• 21 per cent lack operational readiness to adapt to changing transfer pricing conditions.
• Only 21 per cent are fully compliant with global documentation rules.
• 73 per cent of the respondents still monitor their transfer pricing results on a merely quarterly or annual basis.
• 72 per cent of companies indicate that their transfer prices have been a core focus of past controversy, whereas 75 per cent expect this to be the case going forward.
• 49 per cent say lack of automation is the biggest operating model challenge.

In The Spotlight: A New Era Of Transparency And Risk is the first installment of EY's 2016 Transfer Pricing Survey Series, conducted between April 2016 and June 2016. The respondents included 623 tax and finance executives representing more than 17 industry sectors in 36 countries.