GLOBAL auditing firm EY has encouraged multi-national companies to embrace the new taxation on transfer pricing scheme that government implemented to plug holes in revenue collection.
BY TATIRA ZWINOIRA
The regulations came into effect from January 1 after government enacted new tax legislation of transfer pricing, which endorses the arm’s length principle and imposes transfer pricing documentary requirement for taxpayers.
Speaking to NewsDay on the sidelines of the EY Transfer Pricing seminar yesterday, EY executive director of the business tax advisory division in Zimbabwe Rameck Masaire said the new tax regulations would help companies be more prepared to market changes.
“We definitely have to adapt to global trends because we are part of the global community and as a result you will obviously have a situation where you have certainty in how things are going to happen. If you are not going to remain part of the pricing transfer network when things start happening in other parts of the market that are going to impact on your own goods and services,” Masaire said.
“You will obviously have problems. But when you see transfer pricing developments in the rest of Africa it clearly shows how other countries are looking at how they can deal with that. One key thing that we must really focus on is the social impact for some of these issues. If you were to transfer your profits to other markets that could actually lead to exporting jobs which then means companies can no longer expand.”
He said this would give companies a chance to tighten their books and identify areas for improvement within their business.
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Transfer pricing happens whenever two companies that are part of a multinational group trade with each other. One benefit to the transfer pricing is that it enables multinational corporations to attribute net profit (or loss) before tax among the countries where they do business.
These new tax regulations on transfer pricing govern the taxation of any pricing with domestic associates and all foreign entities. This comes as the Zimbabwe Revenue Authority (Zimra) recorded an 8% below target for its revenue collection and is seeking to bottleneck any holes towards revenue collection.
EY executive director of international tax- transfer pricing and operating model effectiveness in Africa, Michael Hewson, said a majority of countries in the region have adopted these taxation regulation on transfers pricing.
He said it allowed for “better transparency within the business and allows them to operate their good and services better way”.
