The BEPS Action Plans, in an attempt to tackle extreme cases of tax evasion, have inevitably blurred the line between strategic tax planning and fraudulent tax evasion for corporate taxpayers. This, coupled with latest publications of the OECD on ‘Fighting Tax Crime’ where taxpayers’ rights find a bleak mention as ‘suspects’ rights’ has given force to many governments to enact a number of aggressive (and often, unjust) regulations.
‘Qualitative and quantitative value chain analysis’ will prove to be a requisite tool as it is able to swiftly identify and resolve any mismatches between holistically applied value chain analysis and the transactional transfer pricing model of an MNE. Conducting of a qualitative and quantitative value chain analysis helps taxpayers to have certainty in respect of profits allocated to different value drivers across business segments, jurisdictions, and legal entities etc., and will provide insight in whether their current transactional transfer pricing model functions appropriately. This will enable the taxpayer to have defense arguments being readily available at the time of audit if the allocation of profits is questioned.