International Transfer Pricing: MNE Dependency on Knowledge of External Tax Consultants

This paper explores the dependency of multinational enterprises (MNEs) on the international transfer pricing (ITP) knowledge offered by external tax consultants. Based on interviews with 13 ITP/tax executives working for large MNEs in the U.K., we find that the dependency on consultants varies significantly across specific ITP tasks. This dependency is not rooted in a lack of in-house technical ITP knowledge. Rather, consultants offer important industry and process knowledge, often at the individual tax inspector level, that MNEs need to successfully implement their ITP policy and to handle negotiations with tax authorities. The recent OECD project on Base Erosion and Profit Shifting (BEPS) is found to have a limited effect on MNE dependency on consultants, except for the documentation task. We conclude that the profile of consultants as knowledge experts depends on the specific ITP task they undertake.