Simplification in Transfer Pricing A Plea for the Enactment of Rebuttable Predetermined Margins and Methods Within Developing Countries

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Aitor Navarro


It is the aim of this contribution to sustain that, despite the inherent complexity that the enforcement of the arm’s length rationale entails, it is feasible—and desirable—to introduce simplification measures without abandoning this worldwide accepted standard, especially in the context of developing countries and despite reticence shown by international organizations such as the OECD. Complexity in transfer pricing erodes fairness and equity and promotes profit shifting, which paradoxically constitutes the opposite outcome that this set of rules wants to achieve. This is the reason why it is urgent to propose and encourage the adoption of a means to neutralize unnecessary complexity in this field. The adoption of rebuttable predetermined margins and/or methods is proposed as the best solution in a context in which policymakers want to keep the arm’s length rationale intact. Also, even despite its shortcomings, irrebuttable predetermined safe harbors should be considered potentially feasible and a valid policy option.

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Author Biography

Aitor Navarro

Assistant Professor in Tax Law, Carlos III University, Madrid