The OECD Transfer Pricing Guidelines and Value Creation

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The book conducts a critical assessment of the modifications made to the OECD Guidelines concerning intangibles, examining how these changes influence profit shifting, the concept of value creation and anti-avoidance measures within the framework of the arm’s length principle.
Why this book?
This book critically assesses the updated guidance on intangibles outlined in chapters VI and I of the OECD Guidelines. This evaluation is conducted in the context of the base erosion and profit shifting (BEPS) initiative Actions 8-10 Final Reports. The primary objective is to determine the extent to which the modifications introduced in the 2010 OECD Guidelines (now the 2022 OECD Guidelines) align with the OECD’s intentions and effectively test the concept of “taxation where value is created”. The overarching goal is to curtail the “artificial” tax planning potential associated with the arm’s length principle (ALP), which seeks to ensure that multinational corporations pay taxes in line with the economic activities they undertake.
To achieve this, the book delves into the novel concept of value creation and the emphasis on “taxation where value is created”. It seeks to understand the implications and interpretations of these concepts in the context of the ALP.
Additionally, the book aims to anticipate and potentially define any emerging limits on what is considered permissible and impermissible in terms of “new” tax avoidance strategies. The book highlights the need for a reasonableness test in the ALP to address abnormal or unnecessary value-creating features. This involves scrutinizing whether the modifications can effectively deter the shifting of profits from jurisdictions where economic functions are performed to low-tax regions.
In essence, this book contributes to the ongoing discourse on international tax policy and transfer pricing guidelines. It endeavours to shed light on whether the changes introduced by BEPS, as reflected in the updated OECD Guidelines, will indeed serve as a robust mechanism to combat tax avoidance strategies, thereby aligning taxation more closely with value creation in the global economy.
Finally, this book reveals the intricate interplay between the DEMPE concept, Pillar One and the minimum global tax proposed in Pillar Two. Collectively, they establish a comprehensive framework for combating tax avoidance and advancing equity in the realm of taxation.
The OECD Transfer Pricing Guidelines and Value Creation
DOI: https://doi.org/10.59403/2y89y8z
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Chapter 1: Introduction
DOI: https://doi.org/10.59403/2y89y8z
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Chapter 2: Research Questions and Structure of the Book
DOI: https://doi.org/10.59403/2y89y8z
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Chapter 3: Conceptual and Practical Implications of the Arm’s Length Principle as a Profit Allocation Tool in Tax Structuring: The Seeds of Artificial Segregation
DOI: https://doi.org/10.59403/2y89y8z
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Chapter 4: The Post-Base Erosion and Profit Shifting Arm’s Length Principle Reinforces Typical Intangibles Profit Shifting Tax Planning
DOI: https://doi.org/10.59403/2y89y8z
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Chapter 5: Current Normative and Interpretative Framework of the Arm’s Length Principle in Light of the “as accurately delineated principle”
DOI: https://doi.org/10.59403/2y89y8z
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Chapter 6: Proposed Interpretative and Normative Framework of the Arm’s Length Principle in Light of the Functional (i.e. DEMPE) Formula-Based Value Creation Standard
DOI: https://doi.org/10.59403/2y89y8z
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Chapter 7: Conclusions and Recommendations: Transfer Pricing Rules within the Arm’s Length Principle or Beyond?
DOI: https://doi.org/10.59403/2y89y8z
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This book is part of the IBFD Doctoral Series