Michael Hewson, Director of Graphene Economics, recently shared insights from the firm’s annual Transfer Pricing (TP) Matters survey, highlighting key trends and challenges for 2024 and beyond.

Transfer pricing ensures that cross-border transactions between related entities occur at arm’s length, meaning prices reflect those that would be set between independent companies. This principle aims to ensure fair tax collection by preventing tax avoidance through profit shifting across borders.  

According to Hewson, although transfer pricing is not new, it remains a key area of focus for African revenue authorities, especially with the increased scrutiny on multinational enterprises (MNEs).

Hewson pointed out three main trends from the 2024 survey: Firstly, a rise in rigorous audits by tax authorities, with many countries struggling to build capacity in transfer pricing expertise. To address this, global organisations like the International Monetary Fund and Organisation for Economic Co-operation and Development have been providing assistance. Secondly, the digital transformation of businesses is complicating the determination of appropriate transfer pricing, as digital transactions often blur the lines of value creation within MNEs. Finally, Hewson highlighted the growing compliance burden for companies, with stricter regulations and increased pressure from both tax authorities and stakeholders to ensure fair tax practices.

Looking ahead, Hewson anticipates continued challenges in ensuring transparency, particularly in determining what constitutes an “arm’s length” price. Factors like market entry strategies, economic conditions, and global political developments, such as elections, also influence pricing decisions.  

--ChannelAfrica--