THE ARM'S LENGTH PRINCIPLE: A PANACEA OR PROBLEM TO REGULATING TRANSFER PRICING TRANSACTIONS BY MNES IN DEVELOPING COUNTRIES

Transfer pricing manipulation by multinational enterprises is a big problem in developing countries, considering the increased levels of tax avoidance and evasion in these countries. The revenue lost through evasion and avoidance schemes as well as through aggressive tax planning robs developing countries of the much-needed domestic revenues to fund public expenditure. The repercussions of revenue inadequacies are evident in developing countries' governments to adequately invest in education, tax administration, health and security, infrastructural development, and economic development. Most developing countries having enacted transfer pricing regulation, with the arm's length principle are at the core of these regulations. This principle has been criticized in literature for its inefficiency and ineffectiveness in regulating transfer pricing in evolving economic times, while some researchers continue to maintain its relevance. In view of the conflicting views on the cogency of the arm's length principle in developing countries, this paper sought to unpack this debate through an evaluative review to show the areas of disagreement and agreement among scholars. The review was motivated by the continued concern and discussions of tax evasion and avoidance by multinational enterprises through aggressive transfer pricing in developing countries. Through a critical literature review, this article assesses the applicability and relevance of the principle in developing countries. Findings reveal controversies in the availability of comparable data, continued abuse of transfer pricing as well as the difficulty in applying the principle in digital transactions and intangibles.

TAX TRANSPARENCY OF THE OPERATIONS OF MULTINATIONALS IN THE ERA OF COVID-19

Multinationals (MNEs) have an important influence in business activities around the world. They not only tailor the global business models, but also have significant impact on allocation of the global income and wealth, and consequently on the lives of the people in all the countries where doing business. Bigger business - bigger risk, but also bigger income and tendency to hide it and pay less or no tax and other fees. In last few decades, MNEs created different schemes in business and tax planning with intention to avoid (legally or illegally) great part of their tax duties. Since last decade of 20th century, many international organizations have been working on different (but, interrelated) projects to prevent and/or sanction such a behavior of MNEs and make their business operations more transparent. However, COVID-19 pandemic, global locks of cross-borders and conduct of almost all types of business online, put a shadow on many MNEs' business operations and open a door to different methods of tax avoidance. This paper deals with global projects and achievements that made MNEs' operations more transparent in earlier period and difficulties national and international administrations are faced with in making MNEs' playing fair and pay taxes in states where they are making business and income, which have become larger and bigger caused with global pandemic. And, finally, achievement of the agreement on global minimum tax multinationals should pay.