Cost And Benefit Analysis Of Appointment Pricing Agreement In International Taxation

In view of the fact that multinational affiliates use or even abuse transfer pricing to reduce the taxes,the tax authorities in various countries have generally adopted the methods of post-audit and adjustment to crack down on them.However,this kind of method has exposed many insurmountable drawbacks in long-term tax practice,such as the difficulty of obtaining evidence and complicated procedures.In order to reduce the cost of taxation and create a harmonious tax environment,the pricing of the appointment has come into being.Appointment pricing transforms the government regulation mode of transfer pricing from the post-adjustment to the mode of prior consultation,which fully reflects the balanced interests of both taxpayers and tax authorities.That means,in this way,considering the legitimate interests of the taxpayers and reducing the difficulty of tax collection,achieve a win-win situation for taxpayers and tax authorities,so the appointment pricing system has been universally respected by tax authorities in various countries.However,with the push on of the advance pricing agreement,we found that the advance pricing arrangement bring the above benefits,meanwhile,the defects in the advance pricing negotiation process gradually appear.Therefore,this paper uses S company as an example to study the benefits and costs of APA.When analyzing the benefits of the APA,firstly,I analyze the related transactions of the S company and determine the transfer pricing method that suits the S company,that is,the transaction net profit method;secondly,under the arm's length principle determine the S company's sales profit rate and cost plus rate through the BVD database;finally,analyze the benefits of the above indicators on company company profits,cash flow and taxes.The cost of advance pricing agreement is divided into the cost of the conclusion and other costs.The conclusion of the cost is mainly the manpower and material cost spent in the conclusion of the process.The other costs mainly refer to losses,opportunity costs,etc.caused by information leakage.Because not all costs in the process of making an appointment can be expressed in the form of currency,so based on the theory of transaction costs,I use a combination of quantitative and qualitative methods to analyze the cost of APA.Through the analysis of the benefits and cost of the APA,it is found that the APA brings a higher return than the cost of reaching an APA,and the cost of reaching the APA becomes lower and lower as the APA continues to improve.