House Republicans’ proposal to tax imports and not exports could render transfer pricing controversies moot in the U.S., but U.S.-based multinational businesses could still face blowback from foreign governments that are likely to challenge the cost of products and services being traded over international borders.
J. Clark Armitage, a transfer pricing attorney at Caplin & Drysdale, Chartered, explained that the higher the price a foreign entity sells its products and services to its U.S. parent for, the greater the tax that the foreign subsidiary will have to pay in its jurisdiction.
“I can see why transfer pricing will become much less important and possibly not really a field of practice in the U.S., but it’s going to remain important worldwide, and it will remain important with respect to transactions with U.S. companies,” Armitage said.
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Excerpt taken from the article “GOP Tax Plan May Increase Transfer Pricing Scrutiny Abroad” by Vidya Kauri for Law360.