The UN Committee of Experts on International Cooperation in Tax Matters has published a secretariat note concerning the development of its work programme on the topic of transfer pricing, including potential topics for work undertaken by a subcommittee on transfer pricing. The work programme is to be discussed during the twenty-third session of the committee scheduled to be held virtually from 19 to 28 October 2021.

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Summary

This paper provides background information on the topic of transfer pricing for consideration of the Committee of Experts in developing its work programme. The Committee has done substantial work on transfer pricing since 2009 through a multi-stakeholder Subcommittee. Transfer pricing continues to be a priority area to strengthen domestic resource mobilization as part of the post-2015 development agenda. Transfer mis-pricing may impact on the legitimate tax revenues of countries where economic activity of MNEs take place, and therefore the ability of such countries to finance sustainable development activities. Abusive transfer pricing practices are considered to pose major risk to the direct tax base of many countries and developing economies, which are particularly vulnerable as corporate income tax tends to account for a relatively larger share of their revenue.

A decision is sought from the Committee regarding the establishment of a Subcommittee on Transfer Pricing for the 2021 to 2025 membership, which would follow the precedent of prior work done and allow for the efficient involvement of subject matter experts. The paper presents some potential topics for work undertaken by the Subcommittee, such as, for example, practical risk assessment tools, transfer pricing aspects of marketing or trading hubs and simplification measures. It is additionally recommended to closely follow the outcome of the BEPS 2.0 project to examine and explain the interaction between non-arm's length taxing rights under amount A for certain multinationals and the application of the arm's length principle for most companies as well as possible spill-over aspects of safe harbour rules under amount B. A draft Subcommittee mandate is provided for consideration of the Committee.