International Cooperation and Solving Transfer Pricing Disputes: A Discussion about Mutual Agreement Procedures

Abstract

Abstract The mutual agreement procedure is the main instrument available to both taxpayers and tax administrations for mitigating international double taxation arising from transfer pricing adjustments. Although it may apply to cases generated by other tax topics, this article refers strictly to its application in the context of transfer pricing. Ensuring this mechanism operates as smooth as possible is one of the factors contributing to efficient cross-border economic flows of goods and services and their fair taxation, eliminating the risk for multinational groups of paying more taxes than necessary (as a result of transfer pricing adjustments performed by tax authorities). As one of the organisms promoting international cooperation and economic wellbeing, the OECD tracks the performance of member and non-member states in relation to the effective implementation of mutual agreement procedures. The process is not aimed at evaluating the results of one specific country, but rather to offer a global perspective. Through literature review as well as secondary data analysis derived from the annual reports prepared by the National Agency for Fiscal Administration in Romania and the OECD, this article aims at presenting how the Romanian tax authorities are handling mutual agreement procedure cases, as a base for future improvements. Although the Romanian tax authorities have been constantly involved during the last 7 years in solving double taxation cases through mutual agreement procedures, work is still needed in order to make the process more efficient, considering that their results are still significantly below the high-achieving countries, as presented in the OECD reports.