Tue | Sep 26, 2017

transfer pricing regime unnecessary says Samuda

Published:Friday | December 11, 2015 | 12:00 AMDaraine Luton
Karl Samuda

Karl Samuda, a member of the parliamentary opposition, says he is against legislation that would "prevent a company from using its creativity to maximise its profit position".

The North Central St Andrew MP, who speaks on industry for the opposition, said that it is a bad thing to put in place strictures that can cause companies to experience reduced profits.

The House of Representatives on Tuesday passed rules which would help in the implementation of a transfer pricing regime which was recently approved by the House.

The transfer pricing regime applies to multinational entities with income above $500 million per year. It is an anti-tax avoidance legislation aimed at ensuring that related parties operate at arm's length while conducting business transactions.

In a globalised economy, developing countries such as Jamaica are increasingly opening up their borders to multinationals, and it is estimated that as much as two-thirds of cross-border business take place between companies which are members of the same group.

collection of taxes

The Government has said that the collection of taxes from these entities has to be done in a way that does not discourage or distort international trade and investment but realises the correct tax liability.

Samuda, in breaking ranks with his opposition colleagues, said he is not in agreement with transfer pricing laws.

"Poor companies can't help you. So it is good that you are targeting regulations to companies of a certain size but at the same time you must facilitate these companies because the whole idea is that you can't get what they don't earn," Samuda said.

"So the greater you facilitate them the more you are likely to get. They are the only ones who can help poor people. Poor people can't enrich poor people. Rich people, successful businesses, enhance the poor," he added.

The transfer pricing regime relies on the use of the arm's length principle as the standard for transfer pricing between related parties. The principle states that when related parties are made to adhere to this standard, there should be comparability to the pricing of independent commercial entities in similar situations and consequently there should be no distortion in profits and tax liabilities.

"It is the figment of somebody's imagination that this is going to reap you a great degree of revenue. It doesn't make any sense," Samuda said.

The rules, which have been passed by the House, state that a person who carries out connected transactions with another person may request the commissioner general of Tax Administration Jamaica to enter into a transfer pricing agreement. The request for the agreement must be accompanied by documents setting out a discretion of the persons; and connected person's activities and the controlled transactions between them.

The content of the transfer pricing agreement must include the agreed transfer pricing methodology and if applicable, the arm's length range agreed under the transfer pricing agreement.

Finance Minister Dr Peter Phillips said that the whole regime is "fundamentally rooted in the principle of self-assessment of the taxpayer".

"The taxpayer determines, in accordance with the rules, what it is that you think you are liable for," he added.