Going from UN 'vs' OECD to UN 'and' OECD?

At a recent TP Conference in Singapore, there took place some interesting discussions on bringing UN and OECD together. While OECD members are 34 developed countries, UN has 193 members comprising primarily developing countries. As is known, OECD has developed detailed guidelines on Transfer Pricing which are referred to extensively worldwide. Reliance on these guidelines has even been endorsed in various Indian rulings. However, India along with some other UN members, has mostly been opposed to import of OECD guidance into the Practical Manual on Transfer Pricing for Developing Countries. India is of the view that concerns of developing countries will not be considered by resorting to a 'standard' prepared by developed countries.


Keen on dispelling the notion that OECD takes into account only interests of developed countries, Mr Colin Clavey (Senior Tax Adviser, OECD) enumerated various steps taken by OECD for working alongside developing economies (formation of the Global Forum on Transfer Pricing, Advisory Group for Cooperation with non-OECD Countries, Global Relations programme, Annual International Meeting on TP, etc). He emphasized that engaging with non-OECD countries is also a part of OECD’s TP agenda and acknowledged that it is important to give them a voice. Mr Michael Lennard (Chief, International Tax Cooperation Section Financing for Development Office, UN) also recognized that OECD was doing some 'interesting work' on intangibles, which could be considered by UN in its work, simultaneously clarifying that a balanced view would be taken and concerns of developing countries would be addressed.


During another Panel Discussion, Ms Leslie Prescott-Haar (Managing Director, Ceteris, New Zealand) took the view that having separate guidance under UN as well as OECD would increase complexity, uncertainty and risk wherever there was a conflict of approach.


Overall, there seemed to be a consensus among participants as regards bringing convergence between UN and OECD guidance. OECD pointed out that it was doing everything possible to cooperate with developing countries and UN seemed keen to consider OECD work, which India has vociferously protested earlier. As Mr. Lennard pointed out, it is difficult to have consensus of 193 countries on one particular thing and that there are bound to be differences. Moreover, Article 9 (Associated Enterprises) contained in both Conventions is by and large the same. Can this be an indicator that OECD work will gain greater relevance for developing countries in the coming years? Will India's fierce opposition to import of OECD guidance into the UN Manual stand?


The general mood of the participants seemed to be India-wary, with India being voted as one of the most difficult countries when it comes to implementing TP policies and the Indian tax administration being perceived as very 'aggressive.' At one point, the regime was termed as 'arbitrary, vague and unreasonable.' Unfortunately, there was no Speaker present from the Indian tax administration (despite being invited), or it would have been interesting to learn what India's reaction would have been to both these aspects.