TCPI - Tax Council Policy Institute

TCPI
Board of Directors

Chairman
Douglas Bates
Vice President, Federal Relations
Northwestern Mutual

Robin D. Beran
Director, Global Tax & Trade and Assistant Treasurer
Caterpillar, Inc.

David P. Lewis
Vice President - Global Taxes; Chief Tax Executive & Assistant Treasurer
Eli Lilly and Company

James R. McCarthy
Director, Global Tax & Fiscal Policy
Procter & Gamble

Nanci Palmintere
Vice President Finance and Enterprise Services
Intel Corporation

Michael Reilly
Vice President - Taxation
Johnson & Johnson

Karl Schmalz
Assistant General Tax Counsel
Exxon Mobil Corporation

Roger J. LeMaster
Executive Director
Tax Council Policy Institute

February 07 - 08, 2002

Annual Tax Policy & Practice Symposium

The Future of International Transfer Pricing: Practical and Policy Opportunities

The Ritz-Carlton Hotel, Washington DC

Planning Committee |

Agenda

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DAY 1
10:00AM - 12:30PM	Registration Details
12:30PM - 12:45PM	Welcome Details Mr. Barrett, Mr. Levey
12:45PM - 1:45PM	Transfer Pricing Policy in the International Tax System - Past and Present This keynote presentation will provide an historic overview of transfer pricing policy and the rapid escalation in the burdens of transfer pricing compliance that have been imposed on multinational corporate taxpayers in the past decade. It will focus on the specific tensions created as countries seek to preserve their existing aggregate tax base. It will also focus on the question: does the armÕs length standard as it is currently applied produce policies that are fair, efficient, and cost effective? Details Specific points addressed will include: The policy objective of taxing all economic income one time Historical antecedents of current transfer pricing rules and enforcement practices The effectiveness of the armÕs length standard Lessons of the "transfer pricing wars" - U.S. enforcement initiatives of the last decade and the emerging response of other countries Compliance and dispute resolution burdens on multinational taxpayers Mr. Wheeler - Moderator; Ms. Deanehan, Mr. Durst, Mr. Gibbs, Mr. van Hilten, Mr. Lewis
1:45PM - 3:30PM	Practical Steps Toward Consistent International Application of Methodological Norms Principled application of transfer pricing rules requires identification of and agreement on a transfer pricing methodology. This presentation will be conducted in two panels. Panel I, General Transfer Pricing Issues, will examine general application issues associated with Transfer Pricing methodology. It will examine the potential for simplifying dispute resolution by standardizing methodological approaches across countries. It will also examine whether traditional transactional methods, espoused in the law and guidelines of most countries, can be used as a practical matter to resolve intercompany pricing disputes. In addition, the panel will examine the strengths and shortcomings of profits-based methodologies, exploring the practical possibility of further standardization in the international application of profits-based methods. The second panel, Special Methodological Issues, will examine specific issues associated with transfer pricing applications. Among the items to be considered will be whether internationally accepted safe haven approaches can be developed for common related party relationships, such as distribution and contract manufacturing arrangements. Details Module I: General Transfer Pricing Issues Practical application of transactional methods - are they still viable? The proper place for the application of profit and loss split methods Taxpayer and government results orientation and the application of the best method rule Consistent international application of profits-based methodologies consistent standards for the selection of comparables consistent application of capital intensity adjustments possibility of applying industry guidelines international safe harbors additional international guidance Module II: Special Methodological Issues Obstacles to the development of standardized, uniformly applicable distributor and contract manufacturer models Special methodological issues and consistent application of profits-based transfer pricing models business cycles o foreign currency adjustments equity compensation aggregation of business segments/transactions market penetration strategies extraordinary items Mr. Zakupowsky - Moderator; Mr. Ackerman, Mr. Foley, Mr. Frisch, Mr. Happell, Mr. McAlonan, Mr. Messenger, Dr. Plotkin, Dr. Wright, Representative of the U.K. Inland Revenue
3:45PM - 4:45PM	Fact Development and the Policies of Transfer Pricing Documentation Notable among the legal developments of recent years is a proliferation of documentation and penalty regimes in numerous countries. The ostensible objective of these regimes is to identify sufficient information on which to base reasoned transfer pricing enforcement decisions. This presentation will address the question of whether standardization and simplification of documentation requirements is possible and how taxpayers can coordinate their efforts to respond to disparate requirements of numerous countries. Details Issues addressed will include: Proliferation of documentation requirements Simplification and standardization of global core documentation Potential standardization of initial audit information requests Best practices for managing global documentation compliance Addressing differences in international accounting conventions Mr. Reilly - Moderator; Mr. Ainslie, Ms. Byrd, Mr. Grecian, Mr. Hammer, Mr. Maruca, Mr. Rolfe
4:45PM - 6:00PM	Application of Transfer Pricing Rules to Branches and Permanent Establishments Advances in communications and computer technology raise the possibility that more taxpayers may be deemed to have a taxable presence outside their country of residence. The OECD is actively considering how the transfer pricing rules should be applied to the question of allocating income to branches and other permanent establishments. What has traditionally been a concern principally for financial institutions that operate internationally in branch form has become an issue of importance to all taxpayers. The tensions created in this process might well result in fundamental changes to OECD transfer pricing guidelines applicable to non-branch operations. This presentation will examine the impact of technology development and the resulting policy changes that the OECD project on transfer pricing rules should address. Details Specific points addressed may include: OECD reports on allocating income to permanent establishments Application of profit split and other methods to financial institution operations Implications of the creation of an inadvertent permanent establishment Creation of shared service centers for global business efficiencies and the PE risks associated with them Attribution of returns on intangible property within the same legal entity. Utilization of the contract service provider model. The interests of developing countries Mr. Sample - Moderator; Ms. Brown, Mr. Mukherjee, Mr. Neighbour, Mr. Randall, Mr. Sprague, Mr. Srivastava
6:30PM - 9:00PM	Reception and Dinner with Keynote Address Details Dr. R. Glenn Hubbard, Chairman, Council of Economic Advisors, Executive Office of the President
DAY 2
10:15AM - 11:45AM	Adequacy of International Dispute Resolution Mechanisms To an increasing extent, transfer pricing disputes are resolved through country-to-country negotiation in the competent authority process. The increasing number of such disputes is taxing the administrative resources of national tax administrations. Domestic political imperatives make it increasingly difficult for countries to concede revenue base reductions. The process itself seems to provide an advantage to the country that is the first mover. The bilateral APA process has been successful, but suffers from many of the same backlog problems. This presentation will consider whether existing institutions are capable of dealing with the increased flow of disputes, and what additional steps could be taken to ensure that transfer pricing disputes are fully resolved promptly and consistently. Details Topics considered will include: The state of the competent authority dispute resolution process The case for and against taxpayer participation in competent authority meetings Statutes of limitations and prompt dispute resolution The effectiveness of local country administrative appeals in cases destined for competent authority resolution Effects on "consistent system" defense in relation to other countries The case for and against binding arbitration in competent authority and bi-lateral APA negotiations Mr. Barrett - Moderator; Ms. Dunahoo, Mr. Lowell, Professor Park, Mr. Schwartz, Mr. Thomas, Mr. Whaley, Mr. Zed
11:30AM - 1:30PM	Luncheon with Keynote Address Details
1:30PM - 3:15PM	Removing the Obstacles to the Development of an Efficient International Tax System - Future This presentation will discuss the future of international transfer pricing and the obstacles to increased efficiencies that can be brought to international taxation. In addition, discussions with regards to the broader application of the armÕs length standard, and the increased existence to the problems associated with pricing electronic commerce transactions will be highlighted. Details Anti-competitive tax policies (Subpart F) Recommendations of the Commission of the European Communities regarding providing companies with a consolidated corporate tax base for EU-wide activities The impact of the growth in electronic commerce and transfer pricing policies. Evolution of product exchanges and centralized service operations The future of transfer pricing in the international tax system Dr. Merrill - Moderator; Ms. Angus, Mr. Aujean, Mr. Culbertson, Ms. Guarino, Mr. Luby, Mr. Neighbour, Dr. Stone
3:15PM - 4:00PM	Closing Remarks: Details Mr. Barrett, TCPI Planning Committee Member
68:0PM - 10:00AM	Issues Unique to Intellectual Property At the heart of many prominent transfer pricing disputes from G.D. Searle to UPS is an argument over the situs and value of intellectual property assets. Indeed, while recent methodological developments have principally focused on other issues, it was primarily concern over intellectual property-related issues that motivated the U.S. Treasury to embark on a policy of increased transfer pricing enforcement activity following the 1986 Tax Reform Act. This presentation will examine the current state of transfer pricing for intellectual property and the prospects for mitigating potential controversy in the future. Details Mr. Andrus - Moderator; Dr. Ballentine, Mr. van Dam, Mr. Cunningham, Mr. Hannes, Mr. Levenstam, Mr. Mogle, Mr. Musher, Dr. Newlon, Mr. O'Toole

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