The project aims at conducting rigorous research concerning the use of transfer pricing “safe harbors”, and to test the potential practical and conceptual limits of such instruments considering the arm’s length principle.
The objective of the project is to confirm to what extent such instruments are indeed compatible with the arm’s length principle in theory and in practice; whether a broader application of safe harbors is recommendable for developing and emerging economies, or whether even developed countries could make broader use of such mechanisms.
The research will consider whether current or alternative, new safe harbors approaches compatible with the arm’s length principle could serve to prevent transfer pricing disputes, increase certainty and reduce compliance costs, while avoiding double taxation and countering base erosion and profit shifting.
The project expands upon the Organization for Economic Cooperation and Development’s work on safe harbors (Section E on safe harbors in Chapter 4 of its Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations). It also builds upon the work developed through the United Nations Transfer Pricing Subcommittee reflected in the UN Transfer Pricing Manual.
The Safe Harbors Research Project aims at identifying solutions that are conceptually sound, economically coherent, and practical or easy to administer.
The project will unfold in two phases:
- Phase 1 involves the preparation and publication of a comprehensive literature review covering mainly the economics of the subject matter and addressing existing rules on safe harbors in transfer pricing from around the world (December 2020).
- Phase 2 involves the preparation and publication of a “case study” testing the practical application of existing methods and safe harbors around the world, and identifying whether alternative or innovative safe harbors solutions could produce more coherent results and facilitate administration or reduce uncertainty, whilst in compliance with the arm’s length principle. (December 2021)
The Safe Harbors Research project involves publications of research questions and findings, and presentations at conferences, seminars, workshops, as well as various discussions/exchanges with stakeholders (tax authorities, multilateral organizations, taxpayers, academics).
The Safe Harbors Research Project is developed as a collaboration between TPED and Researchers from the Taxation Center of INSPER, a premiere business and economics university in São Paulo, Brazil. The research team will include Prof. Dr. Romero J.S. Tavares, Ph.D. (representing both INSPER and TPED); Dr. Pedro Schoueri, Ph.D. (INSPER Researcher); and Dr. Marta Milewska, Ph.D., Michael Hewson, Philippe Paumier and Sébastien Gonnet (TPED).