It’s an Art, Not a Science: Professionalisation and Global Governance in the Case of Transfer Pricing

Alongside the expansion of global trade in the 20th century, the discipline of transfer pricing – the pricing of transactions between related corporate enterprises – has grown from a minor technical inconvenience to being at the heart of global tax governance and of conflicts surrounding taxation of multinational enterprises. At the intersection of law, economics and accounting, transfer pricing has developed into an autonomous sphere of practice, which has profoundly shaped the structure and content of the international tax regime. Although it lacks the classical professions boundaries - licensing, distinct associations and a state-guaranteed monopoly – transfer pricing effectively functions in the same manner, protected and delineated by abstract specialised expertise associated with transfer pricing rules and methods. Despite a century of challenges, the cornerstone of transfer pricing practice, the arm’s length principle, which mandates related-party trade must accord to market terms, remain at the heart of today’s global tax governance. At the same time, global tax governance critically underpins the transfer pricing profession itself. This paper argues that this mutual interdependence – of global governance on the transfer pricing profession, and vice-versa – provides a new way of understanding the emergence of professional groups, of global governance, and of their interplay. Evidence is drawn from historical analysis, qualitative interviews and participant observation.