Transfer Pricing Enforcement Still a Challenge

December 03, 2010, 07:24 PM

On November 4, 2010, the IRS Advance Pricing Agreement (“APA”) program director, Craig Sharon, revealed that the IRS is hopeful that it will be able to close the gap in transfer pricing enforcement due to the recent restructuring of the Large Business and International Division (“LB&I”). The IRS admitted that its current transfer pricing enforcement falls behind its foreign counterparts and noted that more than 80 percent of double-tax cases before the United States competent authority are foreign-initiated adjustments. As a result, the volume of cases has increased as well as the number of affected countries. In order to combat the ever-evolving and expanding area, the IRS is looking to implement more of the APA principles with the intent to avoid contentious audits and provide real-time advice rather than the traditional unilateral focus of transfer pricing enforcement. According to Sharon, doing so has resulted in greater transparency, cooperation and disclosure amount foreign jurisdictions. Interestingly enough, Sharon stated that foreign countries are now sharing information in new ways. Furthermore, thanks to the Organization for Economic Co-Operation and Development exchange group, more than 500 taxpayer information exchange agreements have been executed by countries in the past 18 months. For more information on the recent restructuring of the LB&I Division and the options for fast track settlement, please click here. –Elaina L. Blanks