Brics to create working groups on transfer pricing, income statistics

New Delhi: Brics countries will set up two working groups on international taxation and transfer pricing and revenue statistics as the grouping seeks to strengthen cooperation between tax administrations and build a collective voice in global tax negotiations.

The move was announced at a meeting of Brics tax leaders in New Delhi on Wednesday, where Union Finance Minister Nirmala Sitharaman said the groups would provide a permanent institutional platform to address common challenges, particularly those faced by tax administrations in developing countries.

The purpose of the working groups is to help member countries share experiences with cross-border taxation and resolve tax rules that may not adequately reflect their fiscal reality. The initiative also seeks to ensure that cooperation continues beyond the individual Brics presidencies, Sitharaman said.

Brics comprises 11 emerging economies – Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, United Arab Emirates, Saudi Arabia and Indonesia. The group accounts for around 40% of global GDP and almost half of the world’s population. India is the second largest economy after China.

The FM said that transfer pricing disputes have a disproportionate impact on tax administrations in developing countries, while tax frameworks that do not reflect their fiscal realities can distort how their tax systems are perceived and evaluated.

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Transfer pricing refers to the valuation of transactions between related companies, such as subsidiaries of the same multinational group, to determine how profits and taxes are divided between countries.

“Transfer pricing disputes cost developing country administrations disproportionately. Revenue frameworks that do not match our fiscal reality distort how we are seen and how we see ourselves,” she said.

The working groups, she said, would ensure institutional continuity and allow member countries to work on these issues over time, regardless of which country holds the BRICS presidency.

Tax administration reforms

Sitharaman also highlighted reforms in India’s tax administration, noting that tax administrations around the world are shifting from paper-based and relationship-dependent processes to data-driven systems and digital technologies.

“India’s experience, including anonymous assessment, pre-filled returns, real-time invoice verification and AI taxpayer assistance, attracted real interest from Brics partners and we tried to share it in practice through the Brics Tax Collaboration Tool, not just in principle,” she said.

Revenue Minister Arvind Shrivastava said: “The Working Group on International Taxation and Transfer Pricing is creating a permanent Brics platform to share experiences on treaty interpretation, transfer pricing audit, APA and MAP mechanisms and multilateral negotiations including the UNFCITC where our collective voice is needed and currently lacking.

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APA stands for Advance Pricing Agreement while MAP stands for Mutual Agreement Procedure. Both are mechanisms used to provide greater certainty in international taxation and the resolution of transfer pricing and cross-border tax disputes.

Sitharaman’s remarks come at a time when international tax rules are being renegotiated through several multilateral processes.

“The Brics economies as major developing countries and source jurisdictions have an important perspective that should be reflected in global tax negotiations to make the rules fair and permanent,” she added.

The Brics Tax Support Network will also be formalized, with member countries finalizing its commissioning. Sitharaman said this network will help facilitate business in the Brics countries.

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