Transfer Pricing in the Post-BEPS Era: the BEPS Package, as a Tool in Helping Tax Authorities Prevent Aggressive Tax Optimization in a Specific Sector. Case Study: the IT Industry in Romania

Abstract

Abstract The debate regarding the willingness of enterprises to use transfer pricing for tax optimization is one with significant history (the first OECD report on transfer pricing dates from 1979). In the last fifteen years, this topic gained great traction as globalization became a key word in all economic undertakings. In 2013 the OECD/G20 officially launched the BEPS project, aimed at identifying and closing any loopholes present in the taxation system used by companies to optimize their tax burden. The work was finalized in 2015 by issuing the BEPS Package. However, the fight against base erosion and profit shifting did not end, as the OECD/G20 periodically monitors how the measures are implemented. Considering the importance of the IT sector in Romania, it is significant to investigate if the BEPS Package is an efficient tool in helping Romanian tax authorities prevent aggressive tax optimization in this industry. To provide a tentative answer, a statistical analysis was performed, aimed at comparing the profitability of related and non-related Romanian IT companies. Although the BEPS Package is not the only factor influencing the behavior of taxpayers, the work of OECD/G20 is one of the main forces shaping the Romanian taxation environment. Following the analysis, no significant differences were identified between the profitability of related and non-related companies, leading to the conclusion that local taxpayers are not inclined to engage in aggressive tax optimization, which is also a consequence of the way in which the legislation was drafted, influenced by the BEPS Package.