Finance Minister Nirmala Sitharaman on Wednesday said transfer pricing disputes place a disproportionate burden on developing countries as India pushed for the creation of two new BRICS working groups focused on taxation.
Addressing the meeting of BRICS heads of tax authorities, Sitharaman said the discussions would consider scoping documents for the proposed groups on International Taxation and Transfer Pricing and Revenue Statistics.
Focus on challenges faced by developing economies
Sitharaman said developing countries often face difficulties in handling transfer pricing disputes and stressed the need for tax frameworks that reflect their economic realities.
“Transfer pricing disputes cost developing-country administrations disproportionately. Revenue frameworks that don't fit our fiscal realities distort how we are seen and how we see ourselves. These Working Groups exist because every country in this room has experienced these problems,” Sitharaman said.
She added that the proposed groups would provide a permanent institutional mechanism for cooperation and would continue beyond India’s current BRICS Chairship.
“They are designed to outlast India's Chairship,” Sitharaman said.
China is set to take over the rotating BRICS Presidency in 2027.
India highlights global tax negotiations
Sitharaman also pointed to ongoing negotiations on international taxation, including discussions under the UN Framework Convention on International Tax Cooperation.
“The decisions made in these processes over the next few years will shape cross-border taxation for a generation. BRICS economies -- as source jurisdictions, as large developing economies, as countries that have built significant domestic tax capacity from a low base -- have a perspective on those negotiations that is essential to their fairness and their durability,” Sitharaman said.
She said India’s BRICS Chairship was intended to build on earlier work while creating a foundation for future presidencies.
Working groups to create permanent platforms
Sitharaman outlined the key priorities of India’s tax track, including greater use of technology in tax administration, reducing individual discretion and promoting common governance standards. She also highlighted investment in people, particularly young professionals.
Revenue Secretary Arvind Shrivastava said BRICS tax experts had spent two days examining the proposed working groups and their scope.
The International Taxation and Transfer Pricing Working Group would provide a platform for countries to exchange experience on treaty interpretation, transfer pricing audits, advance pricing agreements and Mutual Agreement Procedure mechanisms.
The Revenue Statistics Working Group, meanwhile, would focus on developing a framework for assessing fiscal performance that takes into account the economic realities of BRICS countries rather than relying on assumptions designed for different economies.