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Many factors other than transfer pricing influence the profitability of multinationals, but transfer pricing is significant for both tax administrations and taxpayers because it affects the allocation of profits from intra-group transactions between the different tax jurisdictions in which a multinational operates.
The OECD transfer pricing guidelines were first issued in 1979 and have become internationally respected. They maintain the arm's length principle of treating related enterprises within a multinational group and affirm traditional transaction methods as the preferred way of implementing the principle.
An extensive update was published in 1995 and revisions and additional material are published periodically.
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