The traditional rationale of the arm’s length approach to transfer pricing : should the separate accounting model be maintained for modern multinational entities?

This article examines the current transfer pricing regime to consider whether it is a sound model to be applied to modern multinational entities. The arm's length price methodology is examined to enable a discussion of the arguments in favour of such a regime. The article then refutes these arguments concluding that, contrary to the very reason multinational entities exist, applying arm's length rules involves a legal fiction of imagining transactions between unrelated parties. Multinational entities exist to operate in a way that independent entities would not, which the arm's length rules fail to take into account. As such, there is clearly an air of artificiality in applying the arm's length standard. To demonstrate this artificiality with respect to modern multinational entities, multinational banks are used as an example. The article concluded that the separate entity paradigm adopted by the traditional transfer pricing regime is incongruous with the economic theory of modern multinational enterprises.

Advance pricing arrangements : an Australian Tax Office success or a legislative failure?

Australia’s domestic income tax legislation and double tax agreements contain transfer pricing rules which are designed to counter the underpayment of tax by businesses engaged in international dealings between related parties. The current legislation and agreements require that related party transactions take place at a value which reflects an arm’s length price, that is, a price which would be charged between unrelated parties. For a host of reasons, it is increasingly difficult for multinational entities to demonstrate that they are transferring goods and services at a price which is reflective of the behaviour of independent parties, thereby making it difficult to demonstrate compliance with the relevant legislation. Further, where an Australian business undertakes cross-border related party transactions there is the risk of an audit by the Australian Tax Office (ATO). If a business wishes to avoid the risk of an audit, and any ensuing penalties, there is one option: an advance pricing arrangement (APA). An APA is an agreement whereby the future transfer pricing methodology to be used to determine the arm’s length price is agreed to by the taxpayer and the relevant tax authority or authorities. The ATO views the APA process as an important part of its international tax strategy and believes that there are complementary benefits provided to both the taxpayer and the ATO. The ATO promotes the APA process on the basis of creating greater certainty for all parties while reducing compliance costs and the risk of audit and penalty. While the ATO regards the APA system as a success, it may be argued that the implementation of such a system is simply a practical solution to an ongoing problem of an inherent failure in both the legislation and ATO interpretation and application of this legislation to provide certainty to the taxpayer. This paper investigates the use of APAs as a solution to the problem of transfer pricing and considers whether they are the success the ATO claims. It is argued that there is no doubt that APAs provide a valuable practical tool for multinational entities facing the challenges of the taxation of global trading under the current transfer pricing regime. It does not, however, provide a long term solution. Rather, the long term solution may be in the form of legislative amendment.

International transfer pricing : the Australian approach and lessons for Canada

In response to developments in international trade and an increased focus on international transfer-pricing issues, Canada’s minister of finance announced in the 1997 budget that the Department of Finance would undertake a review of the transfer-pricing provisions in the Income Tax Act. On September 11, 1997, the Department of Finance released draft transfer-pricing legislation and Revenue Canada released revised draft Information Circular 87-2R. The legislation was subsequently amended and included in Bill C-28, which received first reading on December 10, 1997. The new rules are intended to update Canada’s international transfer-pricing practices. In particular, they attempt to harmonize the standards in the Income Tax Act with the arm’s-length principle established in the OECD’s transfer pricing guidelines. The new rules also set out contemporaneous documentation requirements in respect of cross-border related-party transactions, facilitate administration of the law by Revenue Canada, and provide for a penalty where transfer prices do not comply with the arm’s-length principle. The Australian tax authorities have similarly reviewed and updated their transfer-pricing practices. Since 1992, the Australian commissioner of taxation has issued three rulings and seven draft rulings directly relating to international transfer pricing. These rulings outline the selection and application of transfer pricing methodologies, documentation requirements, and penalties for non-compliance. The Australian Taxation Office supports the use of advance pricing agreements (APAs) and has expanded its audit strategy by conducting transfer-pricing risk assessment reviews. This article presents a detailed review of Australia’s transfer-pricing policy and practices, which address essentially the same concerns as those at which the new Canadian rules are directed. This review provides a framework for comparison of the approaches adopted in the two jurisdictions. The author concludes that although these approaches differ in some respects, ultimately they produce a similar result. Both regimes set a clear standard to be met by multinational enterprises in establishing transfer prices. Both provide for audits and penalties in the event of noncompliance. And both offer the alternative of an APA as a means of avoiding transfer-pricing disputes with Australian and Canadian tax authorities.

Unusual scene detection using distributed behaviour model and sparse representation

The ability to detect unusual events in surviellance footage as they happen is a highly desireable feature for a surveillance system. However, this problem remains challenging in crowded scenes due to occlusions and the clustering of people. In this paper, we propose using the Distributed Behavior Model (DBM), which has been widely used in computer graphics, for video event detection. Our approach does not rely on object tracking, and is robust to camera movements. We use sparse coding for classification, and test our approach on various datasets. Our proposed approach outperforms a state-of-the-art work which uses the social force model and Latent Dirichlet Allocation.

Managing open incremental process innovation : absorptive capacity and distributed learning

In this conceptual article, we extend earlier work on Open Innovation and Absorptive Capacity. We suggest that the literature on Absorptive Capacity does not place sufficient emphasis on distributed knowledge and learning or on the application of innovative knowledge. To accomplish physical transformations, organisations need specific Innovative Capacities that extend beyond knowledge management. Accessive Capacity is the ability to collect, sort and analyse knowledge from both internal and external sources. Adaptive Capacity is needed to ensure that new pieces of equipment are suitable for the organisation's own purposes even though they may have been originally developed for other uses. Integrative Capacity makes it possible for a new or modified piece of equipment to be fitted into an existing production process with a minimum of inessential and expensive adjustment elsewhere in the process. These Innovative Capacities are controlled and coordinated by Innovative Management Capacity, a higher-order dynamic capability.

Intensity pulsations in distributed feedback Yb:Phosphate waveguide lasers

The intensity pulsations of a cw 1030 nm Yb:Phosphate monolithic waveguide laser with distributed feedback are described. We show that the pulsations could result from the coupling of the two orthogonal polarization modes through the two photon process of cooperative luminescence. The predictions of the presented theoretical model agree well with the observed behaviour.

Excess power circulation in distribution networks containing distributed energy resources

The presence of large number of single-phase distributed energy resources (DERs) can cause severe power quality problems in distribution networks. The DERs can be installed in random locations. This may cause the generation in a particular phase exceeds the load demand in that phase. Therefore the excess power in that phase will be fed back to the transmission network. To avoid this problem, the paper proposes the use of distribution static compensator (DSTATCOM) that needs to be connected at the first bus following a substation. When operated properly, the DSTATCOM can facilitate a set of balanced current flow from the substation, even when excess power is generated by DERs. The proposals are validated through extensive digital computer simulation studies using PSCAD and MATLAB.

Travel behavior of workers in Dhaka and their attitude towards road pricing

Dhaka, the capital of Bangladesh, is facing severe traffic congestion. Owing to the flaws in past land use and transport planning decisions, uncontrolled population growth and urbanization, Dhaka’s traffic condition is worsening. Road space is widely regarded in the literature as a utility, so a common view of transport economists is that its usage ought to be charged. Road pricing policy has proven to be effective in managing travel demand, in order to reduce traffic congestion from road networks in a number of cities including London, Stockholm and Singapore. Road pricing as an economic mechanism to manage travel demand can be more effective and user-friendly when revenue is hypothecated into supply alternatives such as improvements to the transit system. This research investigates the feasibility of adopting road pricing in Dhaka with respect to a significant Bus Rapid Transit (BRT) project. Because both are very new concepts for the population of Dhaka, public acceptability would be a principal issue driving their success or failure. This paper explores the travel behaviour of workers in Dhaka and public perception toward Road Pricing with regards to work trips- based on worker’s travel behaviour. A revealed preference and stated preference survey has been conducted on sample of workers in Dhaka. They were asked limited demographic questions, their current travel behaviour and at the end they had been given several hypothetical choices of integrated BRT and road pricing to choose from. Key finding from the survey is the objective of integrated road pricing; subsidies Bus rapid Transit by road pricing to get reduced BRT fare; cannot be achieved in Dhaka. This is because most of the respondent stated that they would choose the cheapest option Walk-BRT-Walk, even though this would be more time consuming and uncomfortable as they have to walk from home to BRT station and also from BRT station to home. Proper economic analysis has to be carried out to find out the appropriate fare of BRT and road charge with some incentive for the low income people.

Travel behaviour of workers in Dhaka and their attitudes towards road pricing

Dhaka, Bangladesh faces chronic traffic congestion Funding for major infrastructure proves challenging This research is investigating feasibility of adopting: -Road Pricing -with significant Bus Rapid Transit (BRT) project