4 Practical and Theoretical Problems Encountered in Applying the Arm’s Length Principle
Richard S Collier, Joseph L Andrus
Richard Collier, Joseph L Andrus
- Formation of contract — Interpretation of contract — Performance of contract
This chapter examines in greater detail several of the alleged shortcomings of transfer pricing rules based on the ALP. Critics of the ALP argue that various aspects of the ALP cause the existing transfer pricing rules to fall short of the objective of providing a clear and efficient means for accurately allocating income among members of a multi-national enterprise (MNE) group. Such problems, this chapter argues, fall into three categories. A first set of issues involves matters that are conceptual in nature. Next are the problems that are entirely practical in nature. Finally, there is a set of challenging treaty interpretation issues regarding the scope and purpose of Article 9 of the OECD Guidelines and the ALP.