Transfer pricing – the principle of formulary apportionment and small and medium-sized enterprises (SMEs)
DOI:
https://doi.org/10.12775/SIT.2023.008Keywords
transfer pricing, arm’s length principle, SME, global tax orderAbstract
This article discusses the possibility of using the formula apportionment mechanism as a tool to replace the current international tax order based on the separate entity approach and the arm’s length principle, and in particular the importance of such changes for SMEs. The current system is far from perfect and owing to the ongoing changes in the ways of doing business and the technologies available, its weaknesses are deepening.
As a result of the existence of petrified and costly solutions, SME entities lose their competitiveness. It seems however possible to replace such solutions with formulary apportionment mechanisms, which would be simpler, cheaper, and fairer. The change might have a positive impact on the entire system and, in particular, on smaller taxpayers.
References
Avi-Yonah R.S., Benshalom I., Formulary Apportionment: Myths and Prospects – Promoting Better International Policy and Utilizing the Misunderstood and Under-Theorized Formulary Alternative, University of Michigan Law School Scholarship Repository 2011, https://repository.law.umich.edu/cgi/viewcontent.cgi?article=2180&context=articles.
Avi-Yonah R.S., Salaimi M., Minimum Taxation in the United States in the Context of GloBE, „University of Michigan Public Law Research Paper” 2022, nr 22-041.
Bielawska A., Piechocki M., Regulacje prawne dotyczące ustalania cen transferowych i ich oddziaływanie na przebieg transakcji handlowych przedsiębiorców, „Polityka Europejska, Finanse i Marketing” 2019, nr 21.
Borkowski S.C., Gaffney M.A., Mitigating Transfer Pricing Risk Proactively in an Uncertain Global Economy, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2099281.
Cockfield A.J., The rise of the OECD as informal world tax organization through national responses to e-commerce tax challenges, „Yale Journal of Law and Technology” 2006, nr 1.
Dixon L., Gates S.M., Kapur K., Seabury S., Talley E., The Impact of Regulation and Litigation on Small Business and Entrepreneurship, The RAND Institute for Justice, WP WR-317-ICJ, 2006.
Durst M.C., The Tax Policy Outlook for Developing Countries: Reflections on International Formulary Apportionment, „International Centre for Tax Development Working Paper” 2015, nr 32.
Ezenagu A., Safe Harbour Regimes in Transfer Pricing: An African Perspective, „International Centre for Tax Development Working Paper” 2019, nr 100.
Heij G., Anybody out there? The Future of Tax, „Journal of Futures Studies” 2016, nr 2.
Hewitt P., Lymer A., Oats L., History of International Business Taxation, w: The International Taxation System, red. A. Lymer, J. Hasseldyne, New York 2002.
Li J., A comparative empirical study of international transfer pricing practices and audits in New Zealand, Australia and China, Lincoln University Christchurch, Conference Published Abstract.
Lipka K., E-commerce Taxation as an Example of Legal Deadlock, „Krytyka Prawa” 2022, nr 2.
Owczarczyk B., Znaczenie sektora MŚP dla gospodarki rynkowej, „Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu. Nauki o Finansach” 2010, nr 4.
Raport E-commerce: many of the challenges of collecting VAT and customs duties remain to be resolved 2009/12.
Schroger M., Next steps in international debate, w: Tax Policy Challenges in the 21st Century, red. K. Spies, R. Petruzzi, L. Verlag, Wien 2014.
Sebele-Mpofu F., Mashiri E., Schwartz S.C., An exposition of transfer pricing motives, strategies and their implementation in tax avoidance by MNEs in developing countries, Cogent Business & Management 2021, https://www.tandfonline.com/action/showCitFormats?doi=10.1080%2F23311975.2021.1944007.
Solilova V., Small and medium sized enterprises (SMEs) and transfer pricing, „Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis” 2012, nr 2.
Szymczak M., Good practice for transfer mispricing in selected OECD countries, „Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu” 2020, nr 9.
Vachani S., Problems of foreign subsidiaries of SMEs compared with large companies, „International Business Review” 2005, nr 4.
Weiner J.M., Formulary Apportionment and Group Taxation in the European Union – Insights from the United States and Canada, Working Paper 8 March 2005 European Commission.
Wittendorff J., Transfer Pricing and the Arm’s Length Principle in International Tax Law, Alphen aan den Rijn 2010.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Krzysztof Lipka
![Creative Commons License](http://i.creativecommons.org/l/by-nd/4.0/88x31.png)
This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.
Stats
Number of views and downloads: 189
Number of citations: 0