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1 The Emergence of the ALP

Richard S Collier, Joseph L Andrus

From: Transfer Pricing and the Arm's Length Principle After BEPS

Richard Collier, Joseph L Andrus

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 29 February 2024

Formation of contract — Interpretation of contract — Payment of price

This chapter looks at how attempts to reduce the incidence of double taxation eventually gave way to the emergence of the ALP. Double taxation involved the simultaneous taxation of the same income or profits by at least two states. Here, the early discussion was dominated by whether, in an effort to prevent double taxation, taxing rights should be allocated only to the headquarters state or whether, and to what extent, taxing rights might also be granted to the ‘source’ state in which specific items of income might arise or be generated. The discussion, as the chapter shows, eventually proceeded to the division of profits. The ALP was then introduced to ensure that, for tax purposes, there was no diversion of profits resulting from any manipulation of the financial relations between parent and subsidiary companies.

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