Asia-Pacific Transfer Pricing Handbook

Chapter Thirty-Five

Pacific Tax Administrators Coordinate Transfer Pricing Documentation

Transfer Pricing Documentation, as a specific objective, was virtually nonexistent as recently as 1982. A few decades later, governments were requesting huge amounts of transfer pricing data from their taxpayers on an organized basis. Perhaps the high-water mark (or low-water mark, depending on your point of view) for mandatory documentation is the Pacific Association of Tax Administrators (PATA), which developed the Transfer Pricing Documentation Package. PATA members include Australia, Canada, Japan, and the United States.

BACKGROUND

The first transfer pricing documentation case was the Toyota case.1 The U.S. Internal Revenue Service (IRS) audited Toyota Motor Sales USA for the 1975 to 1978 fiscal years. This was a transfer pricing audit, based on the assertion on the part of the IRS that Toyota USA shifted income to Toyota Japan. Nevertheless, Toyota USA provided the IRS with no relevant documents that the IRS could use to substantiate its assertions.2 The IRS went to court and had the court issue a summons to Toyota Motor Sales USA to secure more data transfer pricing documentation. The IRS then had the court issue a summons to Toyota Motor Corporation, the Japanese parent corporation, to obtain transfer pricing documentation

The IRS asserted, in support of its summons, that the court had personal jurisdiction over Toyota Japan, that the IRS had the right to secure the information that ...