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After the gold rush

Comments and comparative statics after the final decisions in the Cameco and Glencore transfer pricing litigation matters, this month in Insights. Two significant transfer pricing cases about mined materials pricing between controlled companies have now been concluded with dismissals of tax authority applications for leave to appeal issued by the highest courts of Australia[1] and Canada.[2]  Both decisions upheld the original transfer pricing policy of the taxpayer after lengthy disputes informed by tax administration practice in two countries that are often looked to internationally for precedent, and by the 1995 edition of the O.E.C.D. Transfer Pricing Guidelines since replaced by 2009, 2010 and 2017 editions. This article first examines two transfer pricing questions that are similar in general outward appearance, approached in different ways by the tax authorities, and evaluated in broadly similar but not identical ways by the courts.  I then consider how each… Read More »After the gold rush

U.S. Tax Court decision in Coca-Cola

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The court’s decision applies the regulations to the facts of the Coca-Cola controlled transactions and arrives at its conclusion in a principled manner.  A combination of critical factors led to the court to side with the I.R.S., and hold that the Supply Points used intangible assets in their businesses, but were not entitled to a return to valuable intangible property at arm’s length as a result of legal ownership or exercise of Supply Point control over the intangible property. See the January edition of Insights. The 2020 decision of the Tax Court in The Coca-Cola Company and Subsidiaries[1] (“Coca-Cola”) $3 billion transfer pricing case may cause Coca-Cola to petition the appropriate U.S. Court of Appeals for the same reason it petitioned the Tax Court.  A large amount of tax is at stake over a number of open tax years.  But in comparison to other transfer… Read More »U.S. Tax Court decision in Coca-Cola

Danish appeal court decision in Ecco Sko A/S

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A recent article in Insights commenting on the decision of the Danish Western High Court on the pricing of intermediate and finished tangible property of the well-known global shoe company at the end of a lengthy transfer pricing audit. See also https://www.plesner.com/insights/highligts/2020/08/ecco-successful-in-landmark-transfer-pricing-case-before-the-danish-western-high-court?sc_lang=en Imagine you are in a Lower East Side tenement in the 19th century. It is 2:00 a.m. the building is totally quiet.  Then, a  sound from above is overhead. It is a shoe dropping on the floor above. You wait for the inevitable follow-up: the sound of a second shoe landing on the floor.  In October, the Danish Tax Agency received a decision[1] from the Western High Court concerning an appeal originating from a transfer pricing audit commenced in 2006. This was the sound of the first shoe. Where is the sound of the second shoe? With a similar sense of inevitability, we… Read More »Danish appeal court decision in Ecco Sko A/S

What next when your transfer pricing approach is 0 for 4 from the 3 point line? (Non-technical)

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The CRA has recently sought leave to appeal the Federal Court of Appeal decision in Cameco to the Supreme Court of Canada.  Surprised?  If you know basketball, this is the play we all knew we would see.  Many streetball players that move into the gym often like to take shots from low-percentage territory, sometimes far beyond the 3-point line.  After all, there is a lot to brag about if one of these shots drops.  Coaches know the probability of scoring from 3-point range is the same for everyone no matter their skill level: lower than the chance of sinking a layup or a 6-foot jump shot.  Moving successfully from the tarmac to a wood court and a competitive game involves taking a coach’s advice, accepting that probability rules, and adjusting your game accordingly by taking more high-probability shots.  The end result?  Fewer 3-pointers attempted, more… Read More »What next when your transfer pricing approach is 0 for 4 from the 3 point line? (Non-technical)

IRS documentation best practices FAQ

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The IRS released some helpful guidance for drafters of §6662(d) transfer pricing reports a few months ago. This guidance is especially helpful if one thinks forward to how it might be used during an examination or a double tax case. This article appears in Insights and is also available in Canada through Thomson Reuters Taxnet Pro service. THE DO’S AND DON’TS OF I.R.S. TRANSFER PRICING STORYTIME Earlier this year, the I.R.S. updated its Transfer Pricing Documentation Best Practices F.A.Q. list with a response to Q. 4, What are some areas the I.R.S. has identified in transfer pricing documentation reports that could benefit from improvement?1 Given the uncanny resemblance of the I.R.S. list of documentation pet peeves to my many years of review notes written for transfer pricing documentation drafters in the U.S., Canada, and elsewhere, it seemed that this would be a good time of… Read More »IRS documentation best practices FAQ

Pillar 1 working draft now available

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A working version of a draft of the OECD’s Pillar One and Two has become available via Allison Christians of McGill, and published by #MNETax . Contrast this with the latest from Clausing, Saez and Zucman, and it becomes clear why the policy obstacles are politically enormous.

Muddah, Faddah kindly disregard this letter

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Following transfer pricing for the digital economy? The OECD wrote to the G20, indicating that the letter from US Treasury remains a political obstacle to taxing the digital economy. Back to Camp Granada to make the best of it.

OECD to use hybrid model for digital P.E. and profit attribution

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An early March article in Insights updates on the OECD consensus built around the Unified Approach now being carried forward by the broader international community of tax administrations. Many questions remain to be answered, but there is now direction. Next step is the determination of magnitude. The O.E.C.D. announced on January 31, 2020, that its policy development efforts under Pillar One, related to the taxation of the digital economy, will move forward using the non-consensus “Unified Approach” as a working model.1 In the interest of averting the negative worldwide welfare effects of trade countermeasures to unilateral Digital Services Taxes, the O.E.C.D.’s deadline for obtaining a consensus outcome is highly ambitious. Consensus outcomes for Pillar One and its less controversial, but nonetheless complex, Pillar Two counterpart are expected by the end of 2020 – a relative blink of an eye when we recall that the groundbreaking… Read More »OECD to use hybrid model for digital P.E. and profit attribution

Sketch of Pillar 1 is the Unified Approach, say BEPS IF members

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A January 31 announcement from the OECD signals a willingness to work with the Unified Approach to Pillar 1 as drafted by the OECD CTPA Secretariat. Further work and negotiations will proceed at a quick pace through 2020. Some commentary on the challenges identified appears in the January volume of Insights.

Comments on the OECD Unified Approach

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Ahead of the public consultation on the policy draft, this article in Insights reviews some of the main features of the proposed Pillar 1 attempt at compromise. Also forthcoming on Thomson Reuters Taxnet Pro. HOW SOON IS NOW? O.E.C.D. STARTS WORK ON A SUBSTITUTE FOR UNILATERAL DIGITAL ECONOMY FIXES When you say it’s gonna happen ‘now’ When exactly do you mean? See I’ve already waited too long And all my hope is gone– The Smiths, “How Soon Is Now?” This month finds the arm’s length principle continuing to operate among O.E.C.D. Member States and the broader inclusive framework working toward international tax reform of the digitized economy. In a little more than a year, this may be different. The O.E.C.D.’s work plan1 for urgent policy development will investigate a new nexus standard and departures from the arm’s length principle in certain circumstances where the approach… Read More »Comments on the OECD Unified Approach