This article provides an overview of the important role played by technology in taxation and transfer pricing in Latin America, and presents comprehensive research to illustrate the digital path taken by tax administrations and corporations in Latin America and worldwide.
Given current developments in taxation, taxpayers and tax authorities face numerous challenges that result from an era of data gathering and full-transparency. Consequently, tax administrations in Latin America and worldwide are increasingly relying on digital technologies. The digital systems that are already in place can provide real-time tax collection, reconciliations and assessments. Furthermore, data exchange among the tax authorities is becoming an automated process that can provide tax administrations with a holistic picture of multinational enterprises (MNEs), thereby enabling tax authorities to undertake multilateral audits.
Coherence, Transparency and Substance in the World Following the OECD/G20 BEPS Initiative
The Final Reports on the OECD/G20 BEPS initiative were issued on 5 October 2015 with the purpose of dealing with the tax strategies adopted by MNEs that, from the perspective of the tax authorities, are intended to exploit gaps and mismatches in the tax systems so as to artificially shift profits to low or non-tax jurisdictions. The Final Reports are based on the following three fundamental pillars:
- coherence in the international tax rules relating to cross-border activities;
- strengthening the substance requirement in the international standards; and
- improving transparency at a global level.
Framework for Tax and Transfer Pricing Compliance
The tax administrations globally are increasingly relying on digital technologies for data gathering, the exchange of information and analytics. As stated in section 1.1., the digital systems that are already in place can provide real-time tax collection, reconciliations and issue assessments. Furthermore, data exchange among tax authorities is becoming not only a priority in the world following the OECD/G20 BEPS initiative as a way to reduce asymmetry of information, but also is an alternative to create a holistic view of the allocation of profits of the MNEs, thereby contributing to a more efficient risk assessment architecture and speeding up audit processes and investigations.