The inaugural TP Minds Canada conference was held on June 11-12, 2019 in Toronto, Canada. It brought together experts and delegates from diverse fields of practice, including professional services firms, multinational taxpayers, law firms, the Canada Revenue Agency (CRA), the Organisation for Economic Co-operation and Development (OECD), Internal Revenue Service (IRS), European Commission, International Monetary Fund (IMF) and the Tax Court of Canada.
Hot topics for discussion at the conference included taxation of the digital economy, approaches for “hard to value intangibles”, the adoption of technology within the tax department, and lessons learned from country-by-country reporting.
The conference began with a panel of global transfer pricing policy leaders, including representatives from the OECD, CRA and IMF, moderated by Matt Billings of Duff & Phelps’ transfer pricing practice in Toronto. Topics of discussion included:
- How the CRA and other jurisdictions will factor in certain new sections in the OECD Guidelines, that appear to deviate from the arm’s length principle;
- An update on the OECD’s International Compliance Assurance Program (ICAP);
- How the CRA has invested its extra funding since the first post-BEPS federal budget in 2016;
- Updates from the Transfer Pricing Review Committee, on recharacterization and penalties; and
- Highlights from the IMF/OECD’s latest Update on Tax Uncertainty, prepared for the G20.
Many of the panel’s responses touched on the difficulty of achieving global consensus, differing priorities between jurisdictions, the high stakes for taxpayers and national governments and the likelihood for increasing numbers of tax disputes related to transfer pricing.
Two other panels also featured speakers from the Duff & Phelps’ transfer pricing group.
Matt Billings moderated a panel of senior tax executives who spoke of their experience with transfer pricing dispute resolution. Topics of discussion included:
- How CRA audits have changed in recent years, since the BEPS agenda;
- How best to deal with tax auditors, including managing the taxpayer’s “behavioral risk”;
- How and when to quantify transfer pricing audit risks, and brief other stakeholders;
- How to respond to audit queries that are too extensive, and/or come with challenging deadlines;
- During difficult audits, how and when to reach out to someone else at the CRA for help;
- How to choose between advanced pricing agreements, versus a document-and-defend strategy;
- When it may be preferable to pursue domestic appeals before Mutual Agreement Procedures; and
- Which deadlines are most important to meet, and most problematic to miss.
Many of the responses touched on the benefits of treating auditors with respect, relying on advisors, developing an audit strategy in advance and helping auditors understand the taxpayer’s broader business context.
Susan Fickling-Munge from the firm’s Chicago office participated on a panel with other transfer pricing professionals to discuss the shifting landscape of defining and valuing intangibles. Topics of discussion included:
- The current environment in transfer pricing around valuing intangibles, including discussion on the concepts codified under OECD guidance on Hard to Value Intangibles (HTVI);
- Strategies to manage HTVI treatment through the use of agreements with taxing authorities as well as maintaining evidence around intangible projections and outcomes;
- The pitfalls that can come from relying solely on financial accounting valuations for transfer pricing purposes; and
- Insights from panelist experiences on a variety of intangible and HTVI-related matters in tax audits.
The panelists’ responses emphasized the increased scrutiny of intangible analyses by taxing authorities and the heightened importance for taxpayers to understand the potential risks or exposures surrounding their IP landscape.
