Taxation of multi-national companies: An assesment with regards to transfer pricing

The manipulation of transfer prices by the multi-national companies that have become the determinative factor during the globalization process, in other words preferring the method of paying lower tax or no tax by assigning higher or lower prices than their precedents, cause the depreciation of countries' tax base. Within this context, the pricing of realized transactions between related parties is significant in terms of accurately determining taxable incomes. When the negative effects of tax incomes are taken into account, the arrangements of transfer pricing rules do appear as a necessity. Within this scope, a legal infrastructure is created by the legislative arrangement of both multi-national companies and countries. Although a legal infrastructure is created to prevent loss of tax base, states face tax losses in significant amounts caused by the lack of effective tax auditing and manipulations of transfer pricing. The aim of this study is primarily to analyze the arrangements regarding taxation of multi-national companies and transfer pricing as well as considering the recent developments in the subject area; and then shed a light on similar and different aspects of tax auditing processes regarding the transfer pricing in Turkey and selected countries. The differences between both their legislations and governing structures of the countries are introduced when their approaches towards the transfer pricing auditing process are defined. The most significant constraint herein is that results of the transfer pricing auditing are included within the tax auditing results and that the countries are reluctant to share data within the scope of taxpayer rights. As the conclusion, the problems faced during transfer pricing auditing process in our country are explained in detail; and suggestions towards increasing the efficiency of transfer pricing auditing are discussed in the study.