The Revenue has advertised for a new resource to help it implement the transfer pricing rules that oversee important aspects of foreign direct investment here.
A request for tenders was published last week for a comprehensive database of company information to be used for transfer pricing administration reasons.
The request was published as the issue of transfer pricing was featuring at the hearings into Apple’s tax affairs by the US Senate’s subcommittee on permanent investigations.
At the outset of those hearings the committee's chairman, Democratic senator Carl Levin, said many US companies including Apple use transfer pricing to shift intellectual property rights from the US to offshore affiliates and then direct income associated with that intellectual property – taxable income that would otherwise flow to the US where the intellectual property was developed to the affiliates' home jurisdiction, "which is typically a tax haven".
A spokeswoman for the Revenue Commissioners said the invitation for bids to supply a database is part of a drive to enhance the Revenue’s transfer pricing compliance programme.
“Revenue already has a wide range of ownership and financial data at its disposal to assess transfer pricing issues. The aim of this procurement competition is to extend the coverage of the data available to Revenue.”
Worldwide database
The request for tenders concerns access to a comprehensive worldwide database of standardised company financial and ownership information for transfer pricing tax administration reasons.
“The tenderer will provide access to an electronic worldwide database on a wide range of both private and public companies,” according to the request published by the Revenue. “The database will be easily searched and analysed with reporting ability for comparisons.”
Proven track record
Those submitting bids will have to show a proven track record of provision, to tax administrations, of services of a similar nature to those being sought by the Revenue.
Transfer pricing rules essentially try to establish that transactions within multinationals occur at price levels that would apply if they were transactions involving two unconnected entities.
New rules on transfer pricing were introduced in 2011. Up to then Ireland did not any formal transfer pricing rules thought the arm’s length principle was applied by the authorities. The changes introduced in 2011 brought Ireland into line with international tax standards in this area. The introduction of the new code was seen as broadly positive as it is in the interest of both multinational corporations and the Revenue that transactions within corporations are not subsequently challenged by other tax authorities, such as the Internal Revenue Service in the US.
At the Washington hearings Senator Levin said US corporations were increasingly shifting the valuable intellectual property that lay behind the wealth of corporations such as Apple, to countries outside the use, and involving the practice of transfer pricing.
It is estimated that up to 60 per cent of global trade occurs within multinational corporations, with the transactions involved being accounted for in their books according to the rules governing transfer pricing.
