Brics To Set Up Working Groups On Transfer Pricing, Revenue Statistics

(MENAFN- Live Mint) New Delhi: Brics countries will set up two working groups on international taxation and transfer pricing, and revenue statistics, as the grouping seeks to strengthen cooperation among tax administrations and build a collective voice in global tax negotiations.

The move was announced at a meeting of Brics heads of tax authorities in New Delhi on Wednesday, where Union finance minister Nirmala Sitharaman said the groups would provide a sustained institutional platform to address common challenges, particularly those faced by developing-country tax administrations.

The working groups are intended to help member countries share experience on cross-border taxation and address tax rules that may not adequately reflect their fiscal realities. The initiative also seeks to ensure that cooperation continues beyond individual Brics chairships, Sitharaman said.

Brics comprises 11 emerging economies-Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, the United Arab Emirates, Saudi Arabia and Indonesia. The grouping accounts for around 40% of global GDP and nearly half of the world's population. India is its second-largest economy after China.

The FM said transfer-pricing disputes have a disproportionate impact on developing-country tax administrations, while tax frameworks that do not reflect their fiscal realities can distort how their tax systems are viewed and assessed.

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Transfer pricing refers to the pricing of transactions between related companies, such as subsidiaries of the same multinational group, to determine how profits and taxes are allocated across countries.

“Transfer pricing disputes cost developing-country administrations disproportionately. Revenue frameworks that don't fit our fiscal realities distort how we are seen and how we see ourselves,” she said.

The working groups, she said, would provide institutional continuity and allow member countries to work on these issues over time, regardless of which country holds the Brics chair.

Tax administration reforms

Sitharaman also highlighted India's tax administration reforms, noting that tax administrations globally are moving from paper-based and relationship-dependent processes to data-driven and digitally enabled systems.

“India's experience here, including faceless assessment, pre-filled returns, real-time invoice authentication and AI-enabled taxpayer assistance, has attracted genuine interest from Brics partners, and we have tried to share it practically, through the Brics Tax Collaboration Tool, rather than merely in principle,” she said.

Revenue Secretary Arvind Shrivastava said,“the International Taxation and Transfer Pricing Working Group creates a permanent Brics platform for sharing experience on treaty interpretation, transfer pricing audit, APA and MAP mechanisms, and the multilateral negotiations including the UNFCITC, where our collective voice is needed and currently insufficient.”

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APA stands for Advance Pricing Agreement, while MAP stands for Mutual Agreement Procedure. Both are mechanisms used to provide greater certainty in international taxation and resolve transfer-pricing and cross-border tax disputes.

Sitharaman's remarks come as international tax rules are being renegotiated through several multilateral processes.

“Brics economies, as major developing countries and source jurisdictions, have an important perspective that should be reflected in the global tax negotiations to make the rules fair and durable,” she added.

The Brics Tax Support Network will also be formalised, with member countries finalising its terms of reference. Sitharaman said the network would help promote ease of doing business across Brics countries.

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