Review of The Transfer Pricing of Intangibles (Hardcover)

Since nobody's reviewed this much at all (I only read the TaxAnalyst's review of this book before I even thought of purchasing this) I guess I might as well be the first one on Amazon to review this.

First off just going to state that I'm currently a Master's-Tax, CFA level II candidate that has passed the US CPA exam so I do have some knowledge of this topic, as well as valuation, accounting practices, etc. No real-life experience, however. Basically going to give my perspective on the most of the book I have read so far (otherwise I'll probably forget to review, as I'll be busy after the end of Spring Break). I'm also assuming if you're even here you have some understanding of tax law--without it, this book can be a rather slow read.

First, the bad. While the book itself is quite small--approx. 320 pages, less than full-size hard-cover--and therefore terse, there are times when the points that transfer pricing rules in the various countries are unclear, perhaps unfair, etc. are reiterated way too much. It also talks about documentation to a good degree (a big requirement, as anyone who has any small understanding of T/P would know). However, as a student I expected much more with regard to this and perhaps some prime examples. It basically went on with the fact that the documentations requirements for, say, the US are not only high, but very hazy and therefore leaves companies vulnerable to the IRC Sec. 6662 penalties for TP adjustments. Considering that the book is on TP AND intangibles, I guess the lack of any available real-life examples should not be surprising. (If the book had at least given one descriptive example, even if theoretical, I would have gladly given 5 stars for this review.) Another odd thing was that intangible valuation for taxation purposes was not really per se discussed. As many would call this an art form, I'll refrain from commenting on this, and perhaps the author was just being smart in not discussing it either, as the valuation for such items are often delegated to independent third party valuation houses anyway. Just as an aside though, my understanding is that there are some fairly useful US cases on such intagible valuation/taxation if one looks for it, so it's not so bad.

As for the outline of the book, the first third of the book basically concerns itself with transfer pricing methodologies, the second third documentation requirements/penalties, and the last third mostly on APAs (I guess this part would be important mainly for practitioners with Fortune 500 size clients. The use of APAs, while growing, is only something very specialized practitioners will run into or consider.)

I felt that the recommendations near the end of certain issues were somewhat helpful. The book discusses the merits/shortfalls about global formulary apportionment as a solution to the "arms-length standard" and brings up a concise, and as far as I know, correct, understanding of the formulary apportionment used by the states in the US. I thought this was a nice touch, as reading the Code and pertinent regulations would not lead me to a discussion of such a possible, long-run alternative for the "arms-length standard." There were also occasionally requirements of different countries brought up as well (such as Japan) when they coincided with, for example, the OECD regulations/guidelines. That was a nice touch as well.

In conclusion therefore I found that the book, even though published in 2005, was still quite helpful in giving me more detail about the "logic" and pitfalls of transfer pricing rules in the US and OECD. The writing style is to the point, and leaves a lot of the rules to the footnotes and concentrates on the effect of these rules, somewhat similar to the writing style of Bittker & Eustice (which I like, by the way.) Hard to say if its worth the $150+ retail, considering that it is relatively short for such a tax topic. But at the same time I felt its a lot better than the repetition I often find in large tax books such as those published by Hellerstein. This is the kind of book one reads to get a better understanding, but probably does not really refer to afterwards for said topic. Overall I can definitely discuss this topic much much better now but I'm sure engaging this in the real-world will still be a rough ride. I personally didn't mind shelling out the dough for such analysis.

Hope this helps.

Product Description
<p class="copymedium">Transactions involving intellectual property play an increasingly significant role in economic activity at every level from global to local, with particular challenges for taxation and revenue authorities. Moreover, the manifold complexities associated with identifying, valuing and transferring intangibles make this an issue requiring a creative review of existing transfer pricing methodologies and techniques. In this ground-breaking new study, Michelle Markham offers an in-depth examination of attitudes at the forefront of this rapidly evolving area of taxation law, focusing her work on a comparative analysis of the US, OECD, and Australian perspectives on the transfer pricing of intangible assets.</p><p class="copymedium"><b><i>The Transfer Pricing of Intangibles</i></b><i> </i>not only highlights the current problems encountered in inter-affiliate transactions of intangible property, but also attempts to offer a variety of solutions to these problems. Among the issues explored are the following:</p><p class="copymedium"></p><ul><li class="copymedium">how the tax treatment of intangible in the context of transfer pricing has become a major international tax concern;</li><li class="copymedium">definitional issues which are vital to an understanding of transfer pricing;</li><li class="copymedium">application of the arm's length principle to intangible asset transactions;</li><li class="copymedium">determination of legal and economic ownership of group intangible assets;</li><li class="copymedium">intangible asset valuation and transfer;</li><li class="copymedium">transfer pricing methodologies;</li><li class="copymedium">global formulary apportionment;</li><li class="copymedium">transfer pricing documentation requirements;</li><li class="copymedium">penalties for non-compliance;</li><li class="copymedium">resolution of transfer pricing disputes; and,</li><li class="copymedium">advance pricing agreements</li></ul><p class="copymedium"></p><p>Revenue authorities, multinational enterprise executives, and tax practitioners around the world will greatly appreciate the recommendations and solutions proposed in this knowledgeable and thoughtful book. Its acute sense of the opportunities and pitfalls of an ever-more-complex area of economic activity place it in a category of its own, of inestimable benefit to interested parties.</p><p></p><p></p><p></p><p></p>

Click Here to see more reviews about: The Transfer Pricing of Intangibles (Hardcover)