In 2013, when a few countries in Latin America and the Caribbean faced inflationary contexts, the CIAT Executive Secretariat, with the support of the German Cooperation and the International Tax Compact (ITC), decided to carry out a trial to evaluate the effect of inflation on the processes of setting and adjusting transfer pricing. In the introduction to this document, the reason why it was considered appropriate to carry out this analysis in times of low or no inflation was very aptly justified, outlining the following: “…a logical conclusion could be that the economies of the world have managed to permanently eradicate inflationary problems. Nevertheless, such statement could be careless, on being based on statistical data and not on a qualitative evaluation of the potential risks that an inflationary process may occur.” This introduction also states the objective of the work: “…We endeavor that this study may be the basis of international discussions on the incidence of inflation on transfer pricing, as well as a useful guide for the international tax community, in particular for all those tax specialists whe having to deal with transfer pricing in inflationary contexts.”

Today, and for some years now, the world is facing, almost ubiquitously, an inflationary context. Therefore, the subject of this study is once again part of the agendas of governments.

This work, which I had the opportunity to coordinate, was prepared by four transfer pricing experts from Venezuela, Ecuador and Argentina, with the support of the tax administrations of Chile, Spain, Peru, Dominican Republic, Uruguay and South Africa, who provided feedback.

The document is composed of four sections and an annex, which describe the importance of the topic, some preliminary considerations on inflationary contexts and the potential impact on the control of transfer pricing manipulation and on the pricing process by companies, the potential effects of inflation on the application of each of the five transfer pricing methods that derive of the OECD Guidelines and the so-called ‘sixth method’. The document also provides an analysis model on the impact of inflation on transfer pricing adjustments and some experiences of tax administrations on the subject.

We invite you to download and read this innovative document despite the years it has been published, and it is available in English and Spanish.

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