MANILA, Philippines --- The country is being robbed of its resources. This is how Atty. Benedicta "Dick" Du-Baladad of BDB Law described the possible effect of having no implemented transfer pricing law in the country. "We are missing out on potential income that is due us," she said.
Atty. Baladad is referring to revenues that can be generated from foreign subsidiaries operating in the country through tariffs, charges and corporate income taxes.
But without appropriate taxation policies in place, the country may be missing out on unrealized yield from international trade. The Philippines, for one, has no standard rules on transfer pricing.
"The problem with the absence of transfer pricing rules is both taxpayers and BIR examiners are at a quandary as to how the right transfer price is to be determined," explained Atty. Baladad.
Transfer pricing refers to prices of goods or services charged by individual entities of a conglomerate or controlling interest to one another. It could occur between or among domestic enterprises belonging to a conglomerate or it may involve a Philippine entity member of a multinational enterprise and a related party outside the country.
Atty. Baladad added that because the consolidated income of the conglomerate or group is the utmost priority, prices are managed in a way that the profit of the multinational enterprise is maximized.
"Most multinational enterprises operating in multiple territories employ a complex web of transaction route to take advantage of the differences in tax rates, tax systems, incentive schemes and duties in the countries in which they operate," she said. …