Artificial Intelligence in Transfer Pricing: How Tax Authorities Can Stay Ahead

Abstract

The rapid evolution of Artificial Intelligence (AI) has significantly impacted various fields, including finance, manufacturing, and particularly taxation. This paper explores the intersection of AI and transfer pricing, highlighting how tax authorities can leverage AI to enhance their regulatory capabilities and ensure compliance in a landscape characterized by increasingly complex multinational operations. Transfer pricing, the method by which companies set prices for transactions between subsidiaries, has been a focal point of scrutiny by tax authorities globally. With AI's ability to analyze vast amounts of data, identify patterns, and automate processes, it can provide tax authorities with the tools needed to stay ahead of tax evasion and ensure fair tax practices. The paper discusses the applications of AI in transfer pricing audits, the challenges faced by tax authorities, and the potential ethical implications of using AI in this domain.