Events
Seminar
Analysis of Intellectual Property Tax Planning Strategies of Multinationals and the Impact of the BEPS Project
Speaker
Dr. Ranjana Gupta, Auckland University of Technology, New ZealandEvent date
बुध, 13 दिसमबरVenue
NIPFP AuditoriumAbstract
This article investigates the complex group structures and intangible/intellectual property risk allocation techniques and arrangements used by Multinational Enterprises (MNEs) to adjust or defer their tax liability. MNEs tax planning in relation to cross-border transactions and risk allocation practices have been evaluated in light of the OECD’s (Organisation for Economic Co-operation and Development) recent development and implementation of the Base Erosion and Profit Shifting (BEPS) 15-point Action Plan (hereafter referred to as BEPS Action Plan). Specifically, Actions 8-10 which focus on Aligning Transfer Pricing Outcomes with Value Creation.
To determine how MNEs follow commercial principles to adjust tax liability through intangible asset grouping structures and risk allocation techniques, recent European Commission investigations relating to Starbucks, Amazon and McDonald’s were analysed.
The findings suggest that MNEs reduce or defer their tax liability by systematically moving intangibles within the MNE group and shifting income between related entities established in zero or low-tax jurisdictions in the form of royalty payments. The article demonstrates that the OECD’s recent transfer pricing guideline amendments and BEPS Action Plan are considered the benchmark and will prevent companies reducing their tax by using artificial transactions between associated parties that would not normally occur between independent parties.
Further, as evidenced by the suggested DEMPE function approach under the BEPS Action Plan there is a clear shift in focus from the legal form to the economic reality of transactions and the alignment of risk bearing outcomes in transfer pricing contracts with economic substance. This paper establishes that mere legal ownership of an intangible does not automatically confer rights to enjoy returns from exploitation of such intangible. This approach may force MNEs to reassess their existing structures and how do they conduct business.