Automation is only as reliable as the assumptions it encodes, and in transfer pricing, those assumptions can create problems for multinational companies.
In the article “Transfer pricing automation in ERP systems: traps for compliance,” published in International Tax Review, CRA’s Arin Mitra and Robin Hart examine how aggregate transfer pricing rules clash with transaction-level customs rules and cause compliance risks.
The authors cover these key takeaways:
- High-level policies may not hold at the transaction level: Applying high-level transfer pricing rules at the transaction level can create defensibility gaps.
- Untraced adjustments drive compliance risk: Failing to link year-end adjustments to invoices and SKUs can distort customs values and trigger audits.
- Granularity is essential: Effective ERP automation requires SKU-level visibility to align transfer pricing, customs valuation, and indirect tax outcomes.
To mitigate these risks, the authors recommend that organizations pair automation with more granular, data-driven pricing approaches, and establish stronger linkage between transfer pricing outcomes and individual transactions.
Read more about transfer pricing automation in ERP systems here.
