Global economic changes and the impact on TP from an industry perspective

One of the main challenges currently faced by many industries and multinational enterprises (MNE) is amount B.

The concept of amount B was originally developed in the context of the OECD’s pillar one guidance. Amount B is an initiative aimed at simplifying the determination of profits from baseline distribution functions performed in market jurisdictions. It provides a standard mechanism for determining marketing and distribution-related profits, allowing for variation in how countries adopt amount B (as a safe harbour or a compulsory rule).

The OECD published the final report on amount B on February 19 2024 (the OECD Report on Amount B), which was preceded by two consultation papers from the end of 2022 and mid-2023.

In this guide, Deloitte Germany experts discuss how amount B could affect the tax and transfer pricing approaches of global MNEs in the industrial products and construction sector. Other specialists from Deloitte Germany analyse the impact of specific characteristics of the life sciences and healthcare industry on the applicability of amount B.

Consumer retail and wholesale distribution continue to stand on the brink of a paradigm shift, largely driven by critical factors such as digitalisation-driven new pricing strategies and targeted marketing, AI-induced personalised shopping experiences, and robust online marketplace platforms. Simultaneously, MNEs in the wholesale and retail industry grapple with numerous social, economic, and legislative disruptive forces such as inflation, shifting consumer preferences towards sustainable products, a shrinking labour force, and regulatory obligations such as border carbon taxes and the German Supply Chain Act.

Deloitte transfer pricing leaders in consumer business discuss the potential impact of amount B on profit allocation for companies operating in the wholesale and retail distribution sector, and query the effectiveness of amount B as a simplification measure to address profit allocation challenges.

In the meantime, the banking sector is set to adopt a new Basel framework under transitional rules from 2025. The Basel Committee on Banking Supervision refers to the new rules as finalising the Basel III post-crisis reforms. Former European Central Bank president Mario Draghi named the new accord “the Basel III endgame”, while others refer to it as “Basel 3.1”. In the EU, it is referred to as the Capital Requirements Regulation III and extends into the Capital Requirements Directive VI. Beyond its core objectives of reinforcing approaches for risk valuation, exposure management and leverage limits, capital determination, and regulatory reporting, Basel IV will further increase banks' regulatory capital requirements and reduce their free capital. Basel IV will have a significant impact on banks and other financial institutions.

Experts from Deloitte Japan and Deloitte Singapore analyse the key impacts of the new Basel IV rules on transfer pricing policies and practices in the banking sector.

Specialists from Deloitte Australia provide a history of multinational tax transparency initiatives and delve into the complexities of the upcoming public country-by-country reporting measures. They also offer guidance on what multinationals in the financial services sector could do now to best prepare for the first year of reporting.

The technology, media, and telecommunications (TMT) sector continues to evolve rapidly as organisations respond to recent challenges brought about by factors such as increased interest rates, reduced economic growth, and enhanced regulatory obligations in many major economies. Strategies to address these challenges include the deployment of cutting-edge technologies such as generative AI, streamlining operations to focus on core products and services, and continued investment in innovation. Understanding the risks faced by TMT businesses and the commercial responses are essential to a robust transfer pricing approach. This is particularly the case given the recent enhanced focus on applying the transfer pricing risk allocation framework.

Deloitte transfer pricing specialists from the US and the UK describe the critical importance of applying the transfer pricing risk allocation framework for MNEs in the TMT sector.

This industry guide, as in every year, is a valuable contribution from Deloitte’s global network members as they share industry-based transfer pricing experience, knowledge, and insights. We hope you find this guide informative and useful in your day-to-day business.

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