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The taxing effects of the advance pricing arrangement program: A review of APAs and their impact on stakeholders

Sadiq, Kerrie (2007) The taxing effects of the advance pricing arrangement program: A review of APAs and their impact on stakeholders. Journal of Australian Taxation, 10(1), pp. 104-132.

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    Abstract

    The current transfer pricing rules contained in Australia’s taxation regime are designed to counter the underpayment of tax by businesses engaged in international related-party dealings. Currently, these transactions must take place at an arm’s length price, a requirement which is becoming increasingly difficult to demonstrate. This results in an increased risk of an audit by the Australian Taxation Office. If a taxpayer wishes to avoid the risk of an audit, and any ensuing penalties, there is one option: an advance pricing arrangement (‘APA’). An APA is an agreement whereby the future transfer pricing methodology to be used to determine the arm’s length price is agreed to by the taxpayer and the relevant tax authority or authorities. This article investigates the use of APAs as a solution to the problem of transfer pricing and considers their impact on stakeholders. It is argued that while APAs provide a valuable practical tool for multinational entities facing the challenges of the taxation of global trading under the current regime, they may not be a practical long term solution.

    Impact and interest:

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    ID Code: 49740
    Item Type: Journal Article
    Keywords: pricing rules, international related-party dealings, advance pricing arrangement
    ISSN: 1440-0405
    Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > ACCOUNTING AUDITING AND ACCOUNTABILITY (150100)
    Divisions: Current > QUT Faculties and Divisions > QUT Business School
    Current > Schools > School of Accountancy
    Deposited On: 19 Apr 2012 07:46
    Last Modified: 26 Jun 2012 09:56

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