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Transfer pricing is relatively new subject for Georgian tax authorities, in spite of being made relevant provisions introduce in 2011 in new tax code, only in 2015 was established transfer pricing division1. Since then some success was achieved, but it seem there is some obstacles for effective transfer pricing enforcement. These challenges are follows:2·         Lack of personal and qualification capacity,·         Absence of specific documentation statutory requirements,·         Gaps in transfer pricing risk assessment,·         Low degree of awareness from tax payers and disputes in results,·         Lack of publicly available financial information of private companies,·         Low amount of comparable transactions.To above mentioned challenges may face every developing country’s tax administration, but it can be overcome, for instance to tackle capacity constrains, the OECD and UNDP common project Tax Inspectors without Borders3 might be suitable solution. The project deploys retired tax officials from developing countries share their experience and take part in on going tax audit4. Another solution is strengthening cooperation with foreign tax administrations5 on international tax matters, such as change of information about members of MNE.To deal with the absence of specific documentation statutory requirements, OECD developed certain guidance about this issue and included in new updated guidelines. Specifically it develops a three-tiered approach “consisting of (i) a master file containing standardized information relevant for all MNE group members; (ii) a local file referring specifically to material transactions of the local taxpayer; and (iii) a Country-by-Country Report containing certain information relating to the global allocation of the MNE’s income and taxes paid together with certain indicators of the location of economic activity within the MNE group”.6 This documentation provide understanding to taxpayer specifically what kind of information may be required by tax authorities, make common understanding between then about issue and avoids to certain level undesirable disputes. It also provides opportunities for tax administration to build it tax risk assessment framework through integrating this information it assessment system.Low amount of comparable transactions in small economic such as Georgia is objective fact and it might not be resolved by tax authorities. However, it can be overcome by using comparables on regional level, for instance there is databases provided by Bureau van Dijk, contain public financial information of European companies (AMADEUS) or on worldwide scale (ORBIS), also specifically for financial transsactions there are two main databases Bloomberg terminal and Loan connector. But when using such databases, must be considered reliability of information and relevant adjustments to increase comparability, which lies in the core of arm’s length principle, because on comparables from different countries influence variety of macroeconomic factors and this should be considered.1 Interview Avto2 Interview Avto3 4. Enhancing the Effectiveness of External Support in Building Tax Capacity-14p4 tax-inspectors-without-borders-annual-report-2016-2017-WEB-10p5 4. Enhancing the Effectiveness of External Support in Building Tax Capacity-38p6 OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2017-p233

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