Advance Price Agreement: An Option to Reduce Controversy Between Multinationals and Tax Administrations

摘要

This paper explores the disparities existing between multinational corporations (MNCs) and tax administrations in terms of transfer pricing strategies. Because transfer pricing is actually considered the main tax issue in the international taxation, tax authorities’ regulations have an important role when it comes to transfer pricing policies. In one hand, the manipulation of transfer prices (applied by MNCs) results in important losses in a country’s tax revenue, and thus, create inequalities between nations. In another hand, transfer pricing tax adjustments (applied by tax authorities), result in significant costs for MNCs. Accordingly, these two parties are forced to work together in order to find a fair consensus. The OECD has introduced the Advance Price Agreement (APA), which can be concluded between a MNC and one or many tax administrations. It provides certainty to the MNC regarding the transfer pricing method selected. However, this process can be hard to achieve for MNCs, which need to openly collaborate with many tax authorities, and therefore, expose themselves to important risks. In this respect, this exploratory qualitative study mobilises both the Agency Theory and the Stewardship Theory when analysing this dichotomous relationship between tax administrations and MNCs in respect of transfer pricing strategies.