TPguidelines

At this point it may be helpful to consider whether limits of tolerance could be formulated in advance by tax authorities and made known to enterprises by what are sometimes known as safe haven rules, indicating that prices falling within certain ranges would be accepted without question. The report makes no recommendation on this topic. Whilst such an approach may be useful to both taxpayers and tax authorities within a particular country in minimising disputes over the determination of a proper arm’s length price, such safe havens are likely to be arbitrary since they will rarely fit exactly the varying circumstances even of enterprises in the same trade or business. The minimisation of this arbitrariness would be difficult and would involve a considerable, expenditure of skilled labour in collecting, collating and continuously revising a pool of information about prices and pricing developments. Another point is that safe havens in one country may create difficulties in other countries and further problems would arise if it were a question of seeking to fix a safe haven range of prices acceptable to a number of countries. In any event, it would be necessary to revise periodically the range of prices or rates of interest to reflect changes in market conditions. Moreover, the general use of safe haven ranges for tax purposes could affect the prices charged in the open market. More important perhaps in practice they could open an undesirable scope for tax avoidance.