Executive Briefings

Hungry Tax Authorities Abroad See Transfer Pricing as Easy Prey

Yet another unwelcome side effect of the global recession: hungrier international tax authorities. Experts say that officials in previously tax-friendly countries, including China and India, are looking to fill their coffers by extracting more from U.S.-based multinationals. Among their favorite areas to probe: transfer pricing, or the pricing of sales between subsidiaries and subsequent allocation of taxable income among various countries. Long a focus of the U.S. Internal Revenue Service, transfer pricing is "the lowest-hanging fruit, because it's very subjective and most companies don't have adequate documentation to back up their assertions," says Larry Harding, CEO of High Street Partners, an international business-expansion consultancy.

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Yet another unwelcome side effect of the global recession: hungrier international tax authorities. Experts say that officials in previously tax-friendly countries, including China and India, are looking to fill their coffers by extracting more from U.S.-based multinationals. Among their favorite areas to probe: transfer pricing, or the pricing of sales between subsidiaries and subsequent allocation of taxable income among various countries. Long a focus of the U.S. Internal Revenue Service, transfer pricing is "the lowest-hanging fruit, because it's very subjective and most companies don't have adequate documentation to back up their assertions," says Larry Harding, CEO of High Street Partners, an international business-expansion consultancy.

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