BRICS tax heads create India-led groups on transfer pricing, revenue statistics
Representatives of ten BRICS tax administrations, meeting in New Delhi on 23 September, set up two India-led working groups: on International Taxation and Transfer Pricing, and on Revenue Statistics. The first covers treaty interpretation, transfer pricing audits, advance pricing agreements and mutual agreement procedures. The meeting capped India's BRICS tax chairship; China takes over in 2027.
Syllabus: GS3 · Indian Economy & Growth; GS2 · Groupings & Agreements; GS2 · International Institutions
Why it matters
Take an Indian company that buys software or brand rights from its foreign parent. The price it pays decides how much profit is taxed in India and how much abroad. If Indian and foreign tax officers disagree on that price, the same income can be taxed twice. Sitharaman told the meeting that transfer pricing disputes cost developing-country administrations disproportionately. BRICS economies, which she described as source jurisdictions where multinationals earn their income, now have a standing forum to compare how they audit, settle and negotiate such cases. That matters because the rules of international taxation are being renegotiated, including through the UN tax convention talks, which she said will shape cross-border taxation for a generation.
Prelims pointers
- Transfer pricing: prices charged between related entities of one multinational group; tax authorities test them against the arm's length principle.
- Advance pricing agreement (APA): taxpayer and tax authority agree beforehand on how specified related-party transactions will be priced; India introduced APAs in 2012.
- Mutual agreement procedure (MAP): a tax-treaty mechanism, in Article 25 of the OECD and UN model tax conventions, for two countries' authorities to resolve treaty disputes.
- Central Board of Direct Taxes (CBDT): statutory body under the Central Boards of Revenue Act, 1963, in the Finance Ministry's Department of Revenue.
- BRICS began as BRIC (Brazil, Russia, India, China), whose first summit was held at Yekaterinburg, Russia, in June 2009; South Africa was invited in December 2010.
- UN Framework Convention on International Tax Cooperation: a tax treaty under negotiation; Sitharaman called BRICS perspectives essential to the fairness and durability of these talks.
Practise a UPSC-style question
Consider the following statements about the BRICS working group on international taxation and transfer pricing:
1. It will share experience on treaty interpretation and transfer-pricing audits.
2. It will cover advance pricing agreements and mutual agreement procedures.
3. It is mandated to set a common corporate tax rate for BRICS members.
Which of the statements given above is/are correct?
- (a) 1 and 2 only
- (b) 2 and 3 only
- (c) 1 and 3 only
- (d) 1, 2 and 3
Show the answer
Answer: (a) 1 and 2 only
1 is correct: the Revenue Secretary described the group as a permanent platform for sharing experience on treaty interpretation and transfer pricing audits. 2 is correct: its remit covers the advance pricing agreement and mutual agreement procedure mechanisms. 3 is incorrect: it is a platform for sharing experience among tax administrations, and setting a common tax rate is no part of its stated remit.
Explainers on this topic
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