Tax & Accounting Blog

Catch me if you can – Transfer Pricing in the quantum age of speed and transparency

Accounting, Accounting, Audit & Payroll, Audit, Blog, Business Practices, Business Tax, Corporations, Financial Institutions, Indirect Tax, International Reporting & Compliance, ONESOURCE, Organisations, Tax, Technology, Workflow & Processes May 4, 2018

IBM was the first off the block in late 2017 by announcing it had created a 50-qubit quantum computer. Quick on their tail were other tech giants, such as Google and Intel etc. The race to build “useful” business quantum solutions was on.

While the promise of quantum physics and its commercial application has been hyped for some time now, IBM’s success is a big deal for many reasons – quantum machines can process huge amounts of data extremely quickly, by using the counterintuitive nature of quantum physics.  Speed is just one important feature – this type of processing affords big data classification and topological analysis of complex data sets, something which traditional data mining methods are unable to complete.

We are firmly in the age of big data capitalism. So where does tax feature in this?  Everywhere. “Death and taxes” as the only certainty remains solid in the sub-atomic particle world. Regulatory bodies across the globe through the power of quantum solutions will be armed with the formidable power to delve into the tax positions of companies in an unprecedented level.

Shall we herald the age of quantum regulators? Not quite yet, but soon.

The regulatory sector, particularly from a tax compliance and financial crime perspective is already not just one of the largest benefactors of the data collection, processing, analytics revolution but has also been on the front foot in working with technology partners to harness the potential.

From a transfer pricing perspective, the ability of the ATO and global counterparts to legislate, collect, cross-reference data and take action on cross-border tax anomalies is remarkable. There are now limited legal loopholes in which to hide thanks to the OECD’s BEPS Action Plan, including the new rigorous Action 13 CbC reporting requirements, and there will be even higher levels of transparency in the future.

Data transfers between tax authorities in the supercomputer age will be made at lightning speed, allowing them to size-up in mere moments the veracity of a company’s declaration of cross-border structures and revenue models.

Whilst we’re not quite there yet, companies have started turning to automation and technology to ensure the CbC reports and transfer pricing documentation they produce are accurate. In addition, corporations need to be prepared to provide explanations and support their global structures and tax positions so it’s more important than ever to have accurate and timely data available to make the right decisions. We have seen in recent times how quickly company executives can be called upon for questioning in the public spotlight if there are suspicions of wrongdoing (Facebook, Commonwealth Bank, etc). The potential reputational risk, not to mention financial risk, of being seen to be non-compliant is something that multinationals cannot afford with the advent of big data analytics in this new era of hyper-transparency.

These are just some of the topics up for discussion at TP Minds Australia in Sydney. Join me for the Transfer Pricing Documentation: Progress and Challenges panel discussion on 29 May.

For the latest on our global tax compliance solutions visit our ONESOURCE page.