Artificial Intelligence and Transfer Pricing: Opportunities for Tax Authorities and Multinational Enterprises (MNEs)

Abstract

The integration of Artificial Intelligence (AI) in global tax systems is reshaping the landscape of transfer pricing for multinational enterprises (MNEs). Transfer pricing, the method used to set prices for transactions between related entities in different tax jurisdictions, is a crucial aspect of international tax compliance. As MNEs operate across borders, ensuring accurate and fair transfer pricing becomes increasingly challenging. AI offers both tax authorities and MNEs opportunities to optimize transfer pricing processes, reduce risks of non-compliance, and enhance decision-making capabilities. This paper explores how AI can be leveraged in transfer pricing, delving into its potential to streamline documentation, perform sophisticated data analysis, and improve transparency. We also consider the challenges involved in integrating AI into these processes, such as regulatory concerns, ethical considerations, and the need for skilled personnel. Ultimately, this study highlights the opportunities and limitations of AI in transfer pricing, offering insights for both MNEs and tax authorities.