Tax Cooperation Policy Brief 8, July 2019

Improving Transfer Pricing Audit Challenges in Africa through Modern Legislation and Regulations

By Thulani Shongwe

Auditing multinational enterprises often involves a broad range of complex technical issues, and transfer pricing (TP) is often the most important one. This policy brief looks at some of the key aspects of the modern TP legislation and illustrates how different drafting of regulations can assist in additional revenue collection as well as increased compliance. It further provides practical examples from real cases to show where poor legislation has given rise to tax planning and to profit shifting. Lastly, the brief offers practical solutions to some of the transactions illustrated through the African Tax Administration Forum (ATAF) Suggested Approach to Drafting Transfer Pricing Legislation.

De nombreux aspects techniques particulièrement complexes sont en jeu lorsque l’on aborde la question des audits des entreprises multinationales, dont l’un des plus importants concerne le prix de transfert. La présente note de synthèse examine certains des aspects clés des législations modernes en matière de prix de transfert et illustre à quel point l’adoption d’une approche différente s’agissant de la rédaction des normes peut permettre la perception de recettes supplémentaires et favoriser un meilleur respect de la législation. Elle fournit en outre des exemples pratiques tirés de cas réels qui montrent qu’une mauvaise législation encourage la planification fiscale et contribue à la réorientation des bénéfices. Enfin, elle propose des solutions pratiques concernant certains types de transactions sur la base de l’Approche suggérée pour la rédaction de la législation sur les prix de transfert du Forum africain de l’administration fiscale (ATAF).

La auditoría de empresas multinacionales a menudo entraña una amplia gama de cuestiones técnicas complejas, y la fijación de precios de transferencia suele ser la más importante. Este informe de políticas analiza algunos de los aspectos clave de la legislación moderna en materia de fijación de precios de transferencia y explica cómo una elaboración de los reglamentos diferente puede ayudar a recaudar ingresos adicionales y lograr un mayor cumplimiento. Asimismo, ofrece ejemplos prácticos de casos reales para mostrar en qué situaciones la legislación deficiente da lugar a la planificación tributaria y al traslado de beneficios. Por último, el informe aporta soluciones prácticas para algunas de las transacciones ilustradas mediante el enfoque sugerido por el Foro Africano de Administración Tributaria (FAAT) para la redacción de legislación relativa a la fijación de precios de transferencia (Suggested Approach to Drafting Transfer Pricing Legislation).

This brief is part of the South Centre’s policy brief series focusing on tax policies and the  experiences in international tax cooperation of developing countries.

Efforts to reform international cooperation in tax matters are exhibiting a distinct acceleration.  The direction of change must recognize and incorporate innovations in developing country policies and approaches, otherwise the outcomes will obstruct practical paths to development.

The policy brief series is intended as a tool to assist in further dialogue on needed reforms.

*** The views contained in the policy briefs are personal to the authors and do not represent the institutional views of the South Centre or its Member States.

Download the tax cooperation policy brief below:

Improving Transfer Pricing Audit Challenges in Africa through Modern Legislation and Regulations