“Technology facilitates best practices for compliance regimes in the development of transfer pricing”
These tools significantly help in price fixing between companies
- The use of technology in transfer pricing
Technology is now an important part of the business growth of multinational groups. The Organisation for Economic Co-operation and Development (OECD) established last year guidance on technology-supported transfer pricing, which includes new compliance responsibilities for the cross-border financial activities of many multinationals.
In order to establish whether an inter-firm transaction will create a price differential, it is necessary to compare that transaction with the outcome of a similar transaction in the open market. In order to achieve the best outcome, the use of technological tools will identify the best way to find the best values for the best pricing. To establish the “arm’s length” criterion for inter-firm transactions, firms must rely on equivalent substitute information to analyse whether their transaction is likely to generate a cost differential. The process of finding a fair benchmark to compare one transaction to another requires the review of thousands of potential values. Automation is key to achieving this effectively. It should be mentioned to the reader that there are multiple providers of electronic price discovery and risk functionality. For this reason, it is critical that multinationals adopt all technological means to ensure that their internal financing arrangements are made in compliance with the new regulations. In this day and age, the capabilities of technologies such as ERP allow for substantial improvements in transfer pricing management. Through the integration of these systems, an analysis of the expected profitability of each of the subsidiaries can be made in real time. The incorporation of the technology found in ERPs allows for real-time monitoring of possible risks arising from deviations in transfer pricing policies. It should also be noted that many groups are migrating to a new version called SAP, which allows for improved traceability and reduced errors.
- Artificial Intelligence in the service of businesses for transactions
AI innovations are important for trade, as they lead to increased productivity and better supply chain management, thereby incurring lower trade costs. With the spread of AI, access to goods, services and data is enabled. In the following, we will introduce the reader to some measures to further facilitate the use of AI in international trade: reducing barriers to trade in ICT goods (to facilitate access to hardware needed in the implementation of AI systems), providing an ideal regulatory environment (for trade in services in the deployment of AI systems), facilitating access to human expertise, and enabling free flows of data with confidence (as data is needed in AI systems). With all the above measures, the development of transfer pricing is encouraged. The applications of artificial intelligence in international trade are growing. Proof of this is that an AI-powered machine has demonstrated that translation lowers language barriers in trade, thereby boosting exports.
