Transfer Pricing Insider
Volume: 3 Number: 2
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U.S. GOVERNMENT CONTINUES TO INCREASE FOCUS ON TRANSFER PRICING: INCREASED CONTROVERSY EXPECTED IN TRANSFER PRICING
Source: Bob Ackerman, David J. Canale, Karen Kirwan, Carlos Mallo, Mike Patton, Leigh Anne Pasak and Peyton Robinson (Ernst & Young LLP)
Transfer pricing will undoubtedly become a more significant focus of attention for the Internal Revenue Service (IRS) in their examinations of multinational corporations (MNCs). In a statement regarding international tax reform on May 4, 2009, President Obama announced that the IRS will "hire nearly 800 more IRS agents" to increase international tax enforcement efforts.1 Concurrent with his remarks, the White House issued a press release commenting on the President's proposal, indicating that the budget would provide the IRS with funds "to hire new agents, economists, lawyers, and specialists, increasing the IRS's ability to crack down on offshore tax avoidance, often done through transfer pricing and financial products."2 Despite the Administration’s recent announcements reflecting greater scrutiny of international tax issues, nevertheless, there may still be a public perception that the President's plan will not cover transfer pricing. On May 5, 2009, the New York Times published an article citing different sources indicating that transfer pricing was the "one tax loophole open"3 in the plan. This perception—wholly without merit—may incite Congress to demand that the Treasury Department and the IRS enforce compliance with transfer pricing even more aggressively.4
1Remarks by the President on International Tax Policy Reform, The White House, Office of the Press Secretary, May 4, 2009.
2Leveling the Playing Field: Curbing Tax Havens and Removing Tax Incentives for Shifting Jobs Overseas, The White House, Office of the Press Secretary, May 4, 2009.
3Obama Plan Leaves One Tax Loophole Open, New York Times, May 5, 2009.
4For example, senators Byron L. Dorgan (D-N.D.) and Carl Levin (D-Mich.) have long been concerned that foreign controlled companies are manipulating transfer prices to reduce tax liabilities.
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