Govt upgrading transfer pricing norms: FM
New Delhi: In order to keep ahead of tax planners and prevent tax evasion through manipulative invoicing, the government on Tuesday said it will upgrade transfer pricing norms to match the global standards.
The Directorate General of International Taxation had earlier constituted a committee to look into the issue of transfer pricing provisions.
"The committee will submit its report by March 2011," Finance Minister Pranab Mukherjee told reporters today while addressing a press conference on the issue of black money.
Under transfer pricing mechanism, money is transferred from one jurisdiction to the other at a specified rate for goods and services exchanged between related entities.
Multinational companies use transfer pricing to minimise their worldwide taxes, duties and tariffs.
"It took us sometime to gain expertise; within a short span of time Indian transfer pricing auditors have made adjustments worth Rs 45,000 crore," he said.
In the past 18 months the Directorate of Transfer Pricing has detected mis-pricing of Rs 33,784 crore, which has prevented sifting of an equivalent amount of money outside India, he added.
"As and when the economy is developing, new ways of tax evasion are also developing. We have to keep in mind, after all those tax planners are not less intelligent than the tax deductors. So it is a constant competition. We are also improving our skill…," the Minister said.
Mukherjee said the existing provisions on transfer pricing, which were introduced in 2001 were inadequate.
"There is a need to upgrade these transfer pricing provisions to meet the challenges of growing intangible economy and various cost sharing arrangements," he said.