Renewed Tax Scrutiny Hikes Demand for Advance Pricing Agreements

A global crackdown on tax avoidance, particularly in the area of transfer pricing, is fueling a rise in demand from multinationals for advance agreements with tax authorities to avoid costly and lengthy disputes.

Initiatives to increase transparency and reduce profit shifting, largely led by the OECD, have created a heightened awareness of tax avoidance in transfer pricing—the way companies price transactions among related entities. These initiatives, along with enforcement efforts announced last year by the IRS focusing on companies’ transfer pricing practices, are prompting companies to turn to advance pricing agreements to get more tax certainty rather than wait, according ...