Guest post by David North
From what we see in the news media, transfer pricing is a tool used by unscrupulous corporations to “rig the system” of global trade as they’re caught paying single-digit tax rates on enormous profits. Such stories dominate the business headlines and political rhetoric only because scandal sells and business news media gives disproportionate coverage to the world’s very few extremely large corporations.
For the rest of us, the situation is the opposite—a threat of confiscation rather than a temptation of exploitation. Only the giants can afford departments of full-time experts to design and maintain international tax and treasury strategies involving shell companies to act as “coordination centers” around the world. The rest of us couldn’t possibly talk to national governments, let alone negotiate special tax treaties. Instead, we struggle to establish and maintain a transfer pricing policy that might protect us from double taxation, and even when that’s achieved, the operational obstacle caused by the remedy is often worse than the problem it was meant to cure.
For all but the giants, designing and implementing a transfer pricing policy that’s acceptable to tax authorities without impeding the ability to do business is a tough challenge.
David North is the Corporate Controller for L.S. Starrett Company and has 30 years of financial management leadership experience with a variety of global manufacturing organizations. David’s finance and accounting expertise includes internal controls, SEC reporting, and treasury and risk management.