Transfer Pricing Disputes and Their Growing Impact

This article is a technical report discussing the increasing amounts involved in transfer pricing disputes, highlighting the trend of larger disputes in recent years. It outlines how transfer pricing disputes have historically involved significant sums, often exceeding those in other tax disputes, and notes the term 'jumbo cases' coined in the 1980s to describe such cases. The report details specific examples, including Coca-Cola's tax underpayment of $2.7 billion and Amgen's proposed increase of taxable income by over $23 billion. It explains that the growth in dispute amounts is largely due to the focus on intangibles transactions, which are difficult to value and have become increasingly significant in multinational operations. Additionally, the article discusses the IRS's more assertive stance on penalties and interest, contributing to the rising amounts in disputes. The conclusion suggests that these factors will likely lead to uncertain tax positions and increased attention to transfer pricing issues at the executive level.