By Kash Mansori
When Barack Obama met with Prime Minster Narendra Modi in India last week, one of the items discussed was rather unusual for presidential summits: transfer pricing. But it seems that this attention from the highest levels of government may be having results.
First of all, the US and India seem to have reached agreement on a number of transfer pricing-related issues, including resolving a huge number of competent authority cases involving the transfer pricing of US firms such as IBM, Cisco, Microsoft, and Yahoo. TheTimes of India reports:
Over 150 US companies have applied for APAs in India, but these have all been for unilateral APAs, given the absence of a framework to negotiate bilateral APAs between the US and India. So there’s a lot of potential for US firms to dramatically reduce the uncertainty, at least on the tax side, of doing business in India.
Obama and Modi also met with a number of CEOs to discuss how to improve economic relations between the US and India. During the session Ajay Banga, CEO of Mastercard, specifically singled out transfer pricing as a major impediment to US firms that want to do business in India. Interestingly, yesterday the White House announced that Mr Banga is being appointed to the Advisory Committee for Trade Policy and Negotiations. This presumably means that transfer pricing will continue to receive attention at a very high level of the US government.
Finally, it’s worth noting that the day after Obama’s visit the Indian government announced that they were going to drop a half-billion dollar transfer pricing case against Vodafone. From the Wall Street Journal:
Time will tell, but as of now it appears that the present Indian government has reached the same conclusion as many other observers: India’s tax authorities are hurting the country more than they are helping it. So we could be witnessing the start of a new kind of climate change in India.