Strategic Transfer Pricing Risk Management: New Challenges Ahead

The paper deals with Transfer Pricing and it answers the call for specific studies investigating the relation between Management Control Systems and Transfer Pricing risk management. The research involves a multi-level case study carried out into a Multinational Enterprise based in North-West Italy. Meanwhile, data collection was being carried out, the selected MNE was under investigation by the Italian Revenue Agency on the matter of Transfer Pricing. The Authors had the opportunity to interview Group CFO and a member of the Board of Directors, directly involved in Transfer Pricing practices within the Group. Findings show that MNEs are increasingly compliance-oriented; international Groups’ Top managers consider Transfer Pricing as a strategic tool to reach competitive advantages rather than a mere mean to reach tax savings. On the other hand, tax authorities are increasingly auditing Intangible related transactions, in line with the OECD reports, having gained a remarkable knowledge on Transfer Pricing practices. MNEs adapt their Management Control Systems in order to better detect risky transactions and to elaborate better policies for the future. MNEs, showing an increasing attitude toward compliant behavior and appear to be ready for Joint audits between different jurisdiction which would avoid double taxation risk and result in a mere reallocation of profit among different States. Results foster the research on the topic of Transfer Pricing and provide useful insights to practitioners and Auditors.