CANBERRA: Senior officers from the Australian Taxation Office are to undertake a broad review of the transfer pricing practices of Australia-based subsidiaries of pharmaceutical companies. In a September 7 statement, the ATO said it is “assessing a range of domestic and international tax risks associated with related-party financing, thin capitalization, intellectual property migration, consolidation, business restructures, and research and development.”
The ATO said: “Of particular concern to us are non-arm’s length conditions operating between entities in connection with their cross-border commercial and financial relations, resulting in the amount brought to tax in Australia not reflecting the contribution made by the Australian operations through functions performed, assets used, and risks assumed. That is, the non-arm’s length conditions don’t reflect the economic contribution and value creation of Australian activities.” “The pharmaceutical industry is strategically significant to the Australian economy and tax base. Its size, with annual sales of approximately AUD42bn (USD33.8bn), and the diverse nature of companies operating in it, make it an important area of focus for the ATO,” it said.