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Is it Time to Embrace Blockchain for Transfer Pricing?

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Is it Time to Embrace Blockchain for Transfer Pricing?

07 March 2023

When you hear the term blockchain mentioned with respect to transfer pricing, it’s generally related to operational transfer pricing to ensure policies are in line. But if we think about what blockchain represents—a decentralized, immutable ledger—it opens up many other use cases for transfer pricing.

One of the most powerful use cases I can think of is for comparable company financial data, especially when it comes to private company data. Given that many tax authorities have a preference for local comparables, often taxpayers must turn to private company data.

Imagine a world where tax authorities and transfer pricing practitioners all had access to the same set of financial data for all private companies that file their financials annually with government registries such as the UK’s Companies House. That would guarantee that any TNMM (or CPM as we call it here in the U.S.) analysis would be based on consistent financials/PLIs. This is already mostly true for public companies, since there are global disclosure requirements to protect investors—so any database, such as Standard & Poor’s, uses audited financials that are consistent with annual filings. Why not bring this same level of consistency to private company data? In this manner, we would use the blockchain to ensure that the financial data filed with each country’s registry is made available publicly, and the reliance on data aggregators, like Bureau van Dijk, to ensure accuracy is mitigated.

This would also remove any need for tax authorities to request financial data used by taxpayers to calculate PLIs in analyses, as tax authorities would have access to the same exact data. The only thing that would be required is to know the unique identifier of the company on the blockchain, and the tax authorities would be able to have access to the identical data—one less thing that the tax authorities have to worry about when reviewing a transfer pricing analysis.

Blockchain has countless uses in our world, but also has many uses within transfer pricing that we should strive to take advantage of—with benefits for all parties—the taxpayer, the practitioner, and the tax authorities.

Other resources you may like:

White paper: What You Need to Know About Transfer Pricing Comparable Searches

Blog: The Problem with Pillar One

White paper: Profit Level Indicators You Can Trust

About the Author


Andrei Enoiu, Director, Solutions Engineering, CrossBorder Solutions

Andrei Enoiu over 20 years of transfer pricing experience, both in general transfer pricing consulting and tax technology. Enoiu started his career in professional services at CrossBorder Solutions, and has prepared transfer pricing documentation and planning analyses for clients in a vast array of industries which have successfully passed tax authority scrutiny. For the last decade, Enoiu’s focus has shifted to tax software product management at Thomson Reuters and CrossBorder Solutions, bringing tax software tools to market that meet user needs. Enoiu attended the Leonard R. Stern School of Business at New York University, where he earned his Bachelor of Science in Finance and International Business Cum Laude. Enoiu also holds a Master of Business Administration from the Robert H. Smith School of Business at University of Maryland.