Productive Pricing Believes Congressional Transfer Pricing Hearing Indicates More Scrutiny for Companies Recovering from the Recession

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Productive Pricing believes that House Ways and Means Committee Chairman Levin's hearing on transfer pricing on July 22 is the latest in a series of transfer pricing developments that may trouble companies recovering from the recession. Congress will push the IRS to conduct more transfer pricing audits in an effort to raise revenue to close record-breaking budget deficits. Productive Pricing believes that struggling multinational companies may be surprised to be swept up as part of this IRS initiative. Other countries are expected to apply similar strategies to U.S. owned companies.

Increased transfer pricing enforcement may be a surprise for companies recovering from the recession. After this hearing, all companies should anticipate more challenges to transfer pricing in an effort to close unprecedented budget deficits.

House Ways and Means Committee Chairman Levin's hearing on transfer pricing on July 22 is the latest in a series of recent U.S. transfer pricing developments that can trouble companies recovering from the recession, according to Productive Pricing LLC.

U.S. Representative Lloyd Doggett (D-TX) argued during the hearing that "some multinationals shift the burden of paying for our national security and homeland security and other public services to small businesses and family taxpayers, who play by the rules and do not engage in these shenanigans." While most of the hearing demonstrated Congressional concern with U.S. multinational companies shifting profits offshore, adding additional resources for transfer pricing enforcement was a consistent theme throughout.

Multinationals with low average tax rates should not be the only companies expecting additional scrutiny. "Increased transfer pricing enforcement may be a surprise for companies recovering from the recession. After this hearing, all companies should anticipate more challenges to transfer pricing in an effort to close unprecedented budget deficits. Other countries will likely follow a similar approach," noted Alex Martin, president of Productive Pricing LLC.

The IRS has already announced several initiatives to improve transfer pricing compliance, including a specialist transfer pricing unit and increased tax return disclosures of uncertain tax positions. Martin continued that "governments are looking for additional sources of revenue, and this Congressional hearing on transfer pricing highlights the need for all companies to revisit their approach to intercompany pricing, not just highly profitable multinationals. Rest assured that many other countries are adopting similar strategies to address budgetary problems."

Productive Pricing, a transfer pricing and turnaround management consulting firm, assists multinational companies by improving cashflow and managing global transfer pricing risks through proactive transfer pricing strategies. Intercompany pricing of goods, services and intangible assets is considered the most contentious tax issue for multinational companies. Alex Martin founded the company after a 12-year career at PricewaterhouseCoopers LLP in the U.S. and internationally. As a transfer pricing director with PricewaterhouseCoopers, Alex worked with companies of all sizes to address global transfer pricing issues.

Please visit our website for more information http://www.productivepricing.com or email alex(dot)martin(at)productivepricing(dot)com

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