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The traditional rationale of the arm’s length approach to transfer pricing : should the separate accounting model be maintained for modern multinational entities?

Sadiq, Kerrie (2004) The traditional rationale of the arm’s length approach to transfer pricing : should the separate accounting model be maintained for modern multinational entities? Journal of Australian Taxation, 7(2), pp. 196-250.

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    Abstract

    This article examines the current transfer pricing regime to consider whether it is a sound model to be applied to modern multinational entities. The arm's length price methodology is examined to enable a discussion of the arguments in favour of such a regime. The article then refutes these arguments concluding that, contrary to the very reason multinational entities exist, applying arm's length rules involves a legal fiction of imagining transactions between unrelated parties. Multinational entities exist to operate in a way that independent entities would not, which the arm's length rules fail to take into account. As such, there is clearly an air of artificiality in applying the arm's length standard. To demonstrate this artificiality with respect to modern multinational entities, multinational banks are used as an example. The article concluded that the separate entity paradigm adopted by the traditional transfer pricing regime is incongruous with the economic theory of modern multinational enterprises.

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    ID Code: 50167
    Item Type: Journal Article
    Keywords: taxing rights, arm’s length price methodology
    ISSN: 1440-0405
    Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000)
    Divisions: Current > QUT Faculties and Divisions > QUT Business School
    Current > Schools > School of Accountancy
    Deposited On: 09 May 2012 09:47
    Last Modified: 26 Jun 2012 10:32

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