Tilahun, Nathanael and Yihdego, Abebe G (2023) Unsuccessful Implementation of the OECD Transfer Pricing Guidelines in Low Income Countries: The Case of Ethiopia. British Tax Review (2). pp. 192-211.
Tilahun, Nathanael and Yihdego, Abebe G (2023) Unsuccessful Implementation of the OECD Transfer Pricing Guidelines in Low Income Countries: The Case of Ethiopia. British Tax Review (2). pp. 192-211.
Tilahun, Nathanael and Yihdego, Abebe G (2023) Unsuccessful Implementation of the OECD Transfer Pricing Guidelines in Low Income Countries: The Case of Ethiopia. British Tax Review (2). pp. 192-211.
Abstract
Much international technical assistance is directed towards increasing the capacity of tax authorities in low-income countries to understand and effectively implement the OECD Transfer Pricing Guidelines, and thus retain their fair share of revenue from the transnational economic transactions of multinational enterprises.The outcome ofsuch assistance, although varied, has been generally disappointing. Constraints on material capability are considered the main explanations for the failure of low-income countries to implement transfer pricing rules in practice. By taking Ethiopia as a case study, this article builds on the capacity explanation and shows that capacity is only a generic explanation that needs to be accompanied by context-specific explanations that are not bound to material capability. Despite more than a decade of effort, and nearly two decades since the initial introduction of transfer pricing rules in the tax system, the Ethiopian tax administration has notsuccessfully completed a single transfer pricing audit.This article identifies three country-specific factors that explain the abysmal record of implementation of transfer pricing rules in Ethiopia: the inability of tax officers to depart from long-standing practices that run counter to OECD Guidelines; institutional ambiguity and rivalry among tax policy and enforcement organs; and the possibility of mock compliance with international standards without in practice there being any such compliance. In combination, these factors show that procedures recommended by the OECD for dealing with transfer pricing issues are so far removed from what are in fact the existing practices of the Ethiopian national tax administration that the formal adoption of OECD Guidelines has resulted in little more than organisational re-labelling.
Item Type: | Article |
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Additional Information: | The research underpinning this article was funded by the Bill & Melinda Gates Foundation, administered through the Institute of Development Studies, Contract No: 20/400, Project No: GV/18011, April-December 2021. |
Uncontrolled Keywords: | Developing countries; Ethiopia; Guidelines; Non-compliance; OECD; Tax administration; Transfer pricing |
Divisions: | Faculty of Arts and Humanities Faculty of Arts and Humanities > Essex Law School |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 24 May 2023 12:36 |
Last Modified: | 16 May 2024 21:48 |
URI: | http://repository.essex.ac.uk/id/eprint/35522 |
Available files
Filename: BTR_2_2023_Art_2_Tilahun_Yihdego.pdf