Global Financial Integrity released the following statement today applauding the leadership shown by the Chilean government with regard to transfer pricing issues:

Chilean Tax Authority’s Investigation of Transfer Pricing by Multinationals could yield valuable insight into how companies evade taxes, says Global Financial Integrity

Washington, DC — A new audit program developed by Chile’s tax authority to detect “differences in inter-company transactions” of Chilean multinational corporations is a crucial step towards more effective regulation of a practice often utilized by multinationals to evade taxes, said Global Financial Integrity (GFI) Wednesday.

A GFI analysis of illicit financial flows from developing countries measured Chile’s outflows at approximately $7 to $8 billion per year between 2002-2006. Corporate tax evasion is a major driver of illicit financial outflows.

“We applaud Chile’s announcement that it will more closely examine these inter-company transactions,” said GFI director Raymond Baker. “50-60% of all global trade is between entities of the same corporation, and there is an acute need for more aggressive study of these transactions. The potential to ferret out illicit, tax evading maneuvers by multinationals is significant.”

GFI will release a companion analysis of tax revenue lost to illicit financial outflows in January of 2010. GFI’s illicit financial flows from developing countries report, which is released annually, will be published in spring of 2010. Embargoed copies of these reports will be available to members of the press in advance of their publication dates. Contact Monique Danziger at 202-293-0740 for further information.

Additionally, Chile, a member of the Partnership Panel of the Task Force on Financial Integrity and Economic Development, passed legislation earlier this week which would make it easier for them to exchange tax information with other jurisdictions.  Read the Task Force’s statement on that legislation here…

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