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Martin Murray

Transfer Pricing

By February 18, 2013

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Transfer Pricing The Indian government is aggressively pursuing the tax revenue it believes it is entitled to from foreign multinational corporations with facilities in India. The efforts are focused on the transfer pricing that companies use as products are moved from one location to another. Multinational firms minimize tax liabilities by moving taxable income from higher taxing jurisdictions to lower ones. The Indian government believes it should be able to tax the higher prices as they generate income as the product moves internally within a company.

India currently has over 1500 transfer tax disputes, which some believe will hurt the countries appeal for foreign investment. Currently British mobile phone company Vodafone is fighting a $1.6 billion transfer pricing case in the Bombay High Court. The largest transfer pricing case involves the Anglo-Dutch oil major Royal Dutch Shell, which is being asked for the tax on a $2.8 billion transfer price variance when shares were issued at 10 rupees each but that tax authorities valued them at 183 rupees each.

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February 21, 2013 at 6:34 am
(1) Daman Dwivedi says:

I believe that is up to the Indian government to decide on taxes and not the foreign companies. These companies come and make a lot of money in India by using cheap labor and if these sell the goods for more, then why can’t they be taxed?

February 21, 2013 at 11:54 am
(2) Tirthankar Prajapati says:

The large companies from the USA and Europe have made a decision to operate facilities or do business in India. As such they are liable for taxes to be levied. If this means taxes on the profits they make from moving those products to other countries where they can be sold for more money, then this is right.

February 21, 2013 at 2:23 pm
(3) Tahir Mukhopadhyay says:

The taxing on transfer prices is a discussion that has to take place between the Indian government and the companies that are being taken to court to pay the tax they owe. I have read about the Vodafone situation and agree with the government that they are required to pay the tax.

February 21, 2013 at 3:23 pm
(4) Madhulekha Agarwal says:

If the government does not try to get these foreign companies to pay the taxes on transfer of goods outside the country, then this will continue for ever. The sooner the government makes sure that the tax is paid, then other companies will then pay.

February 21, 2013 at 4:09 pm
(5) Matt Rowe says:

I am not sure what to think of this situation. Companies move goods around from one location to another all the time. I have seen many companies move goods from Mexico to the US, and the price of the items are much higher in the US than in Mexico. But the Mexican government never demands for companies to pay tax on the “theoretical” change in price. I think the Indian government wants to be seen to be tough on foreign companies, but they are unlikely to upset the very companies that they are trying to get to invest in India.

February 21, 2013 at 7:57 pm
(6) Chandrakanti Malhotra says:

I am very glad to see the government being proactive in taking companies to court to obtain the taxes owed. It is up to debate whether the courts will get these foreign companies to actually pay the taxes. What will the government do if the companies refuse to pay?

February 21, 2013 at 9:21 pm
(7) Vajrabaahu Gowda says:

I do not see that any foreign company will be willing to pay the government any tax on “transfer posting”. It not a real price, but an internal price within a company, so I am lost as to why the government thinks that they can gouge out more cash from foreign multi-nationals.

February 21, 2013 at 10:10 pm
(8) DK Singh says:

I do not understand why there are comments here from non-Indians. This is a topic for the Indian government and is an internal taxation issue. I do not comment on American taxation of companies. Please let our government do its job.

February 22, 2013 at 1:57 am
(9) Srinivas Chaudhary says:

Transfer pricing is a bit vague, it is something that is created within a company to make profits, even if they are on paper only. I am not sure the government really is going to win on this subject, but I guess that it has to try.

February 25, 2013 at 1:33 pm
(10) Samantha Rose says:

As some of the commentators have said, it is an internal matter for the Indian government. If they think that they should be getting tax revenue on transfer pricing then good luck to them.

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