For multinational enterprises (MNEs), managing transfer prices requires implementing a sustainable transfer pricing policy that satisfies the arm’s length standard, as well as ensuring that the policy is adequately executed. In this article from the October 2006 issue of International Tax Review, NERA Director Dr. Emmanuel Llinares and Hogan & Hartson Partner Hervé Bidaud argue that having clearly defined functions within a company's tax department is crucial to managing these issues successfully. Dr. Llinares and Mr. Bidaud describe the proper steps MNEs must take in setting up an effective tax department, including agreeing on the definition of procedures, ensuring that these procedures are being applied, and agreeing on the department's performance measurement. The authors also note that a critical aspect of setting up an effective tax department involves taking into account the corporate culture and organization of the tax function within the group.