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On 21 January 2017, the Platform for Collaboration on Tax—a joint initiative of the International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), United Nations, and World Bank Group—invited comments from interested parties on a draft toolkit addressing the ways developing countries can overcome a lack of data on "comparables," or the market prices for goods and services transferred between members of multinational corporations.

NERA transfer pricing experts Associate Director Vladimir Starkov, former Director Sébastien Gonnet, and former Principal Guillaume Madelpuech submitted their comments on 21 February 2017. The authors express their support for the use of the arm’s-length principle in developing countries and show how it can practically applied, even in situations with a lack of data on “comparables.” They discuss, in particular, the appropriateness of an adjustment technique designed by NERA and set forward by the draft toolkit. This research was discussed in the following publications:

  1. S. Gonnet, V. Starkov, and M. Maitra, “Comparability Adjustments in the Absence of Suitable Local Comparables in Emerging and Developing Economies,” Transfer Pricing International Journal, July 2013.
  2. V. Starkov, S. Gonnet, A. Pletz, and M. Maitra, “Comparability Adjustments in the Absence of Suitable Local Comparables in Emerging and Developing Economies – Case Studies,” Transfer Pricing International Journal, March 2014.
  3. V. Starkov, M. Maitra, and A. Li, “Comparability Adjustments in the Absence of Suitable Local Comparables in Emerging and Developing Economies – Adjustment for Risk,” Transfer Pricing International Journal, May 2015.

The authors show how the approach described above may be a viable method to cope with the absence of comparables in a certain country or region, especially in light of the large amount of reliable financial information covering a wide spectrum of industries and functions that is available in certain regions of the world.

The authors acknowledge that transfer pricing adjustments for developing countries is a nascent field which need further studies and refinements. Many possible qualitative methods to adjust for differences in geographic markets exist or could be developed. As a general rule, the authors do not think it is possible or desirable to establish an exhaustive list of such methods in the draft toolkit, even though the draft toolkit may contain references to some methods and best practices, as it does now. They believe that additional research on comparability across economic regions would be beneficial for further development of this topic.