BRICS should work together on transfer pricing as disputes burden developing nations: FM
India's Finance Minister called for BRICS nations to collaborate more closely on transfer pricing, stating that such tax disputes disproportionately burden developing-country tax administrations.
The statement was made at a meeting of BRICS heads of tax authorities, where India backed the creation of two new BRICS Working Groups: one on International Taxation and Transfer Pricing, and another on Revenue Statistics.
India's Revenue Secretary also addressed the meeting, emphasising the value of pooling collective administrative experience among BRICS members in these deliberations.
The proposal is framed as part of India's effort to shape ongoing multilateral renegotiations of cross-border taxation rules, including the UN Framework Convention on International Tax Cooperation, which is currently under active negotiation.
Transfer Pricing and the Arm's Length Principle
Transfer pricing refers to the pricing of transactions between related entities of a multinational enterprise (e.g., a parent company and its foreign subsidiary). Because such related parties can set prices to shift profits into low-tax jurisdictions, tax authorities require these transactions to be priced as if the parties were unrelated — the "arm's length principle."
Key Details
- In India, transfer pricing is codified in the Income Tax Act, 1961, Sections 92 to 92F: Section 92(1) requires that income from an "international transaction" between "associated enterprises" be computed having regard to the arm's-length price
- India introduced an Advance Pricing Agreement (APA) scheme via the Finance Act, 2012, allowing taxpayers to agree the pricing methodology with tax authorities in advance to reduce future disputes; Safe Harbour Rules followed in 2013 for defined categories of transactions
- Globally, the arm's-length principle is codified in the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations
- Developing countries argue the principle, designed largely around OECD-member economic structures, does not always fit their fiscal realities as source jurisdictions for extractive and manufacturing investment
The proposed BRICS Working Group on Transfer Pricing is aimed precisely at this asymmetry — pooling BRICS administrative experience (as source jurisdictions) to influence how transfer pricing rules are designed and applied globally.
OECD/G20 BEPS Project — Actions 8-10
The Base Erosion and Profit Shifting (BEPS) project is a 15-point action plan developed jointly by the OECD and G20 (finalised 2015) to prevent multinational enterprises from artificially shifting profits to low-tax jurisdictions. Actions 8-10 specifically target transfer pricing outcomes that do not align with real economic activity ("value creation").
Key Details
- BEPS Actions 8-10 revised Chapters I (arm's-length principle), II (transfer pricing methods), VI (intangibles), and VIII (cost contribution arrangements) of the OECD Transfer Pricing Guidelines
- India is a member of the OECD/G20 Inclusive Framework on BEPS, which now includes over 140 jurisdictions, and has adopted the Multilateral Convention to Implement Tax Treaty Related Measures (MLI, signed 2017, in force in India from 2019)
- The BEPS process also led to the two-pillar global tax reform: Pillar One (reallocating taxing rights for large multinationals) and Pillar Two (a 15% global minimum corporate tax), agreed in principle by the OECD/G20 Inclusive Framework in 2021
- BRICS members were participants in the BEPS/Inclusive Framework process but have argued for a more universal, UN-anchored forum given that OECD processes are seen as dominated by developed economies
India's push for BRICS-specific tax working groups reflects dissatisfaction with OECD-centred rule-making and a preference for a BRICS/UN-anchored voice in the next generation of international tax rules — the UN Framework Convention on International Tax Cooperation referenced in the meeting.
BRICS as an Institutional Grouping
BRICS is the grouping through which India is pursuing this transfer pricing initiative, and its expanding membership base strengthens the collective bargaining weight behind such proposals.
Key Details
- Originated as "BRIC" (Brazil, Russia, India, China) with the first summit in 2009; South Africa joined in 2010, forming "BRICS"
- Expanded in 2024 to add Egypt, Ethiopia, Iran, and the United Arab Emirates; Indonesia joined in 2025, taking full membership to ten countries (Saudi Arabia was invited in 2024 but has not formally joined)
- BRICS+ members together account for roughly 45% of the world's population and around 35% of global GDP (PPP terms)
- India will hold the BRICS chairmanship in 2026, giving it a direct platform to advance initiatives such as the proposed tax working groups
BRICS's expanded membership (including several major developing/source-country economies) gives added institutional weight to a collective position on transfer pricing that a single developing country could not project alone.
- Income Tax Act, 1961: Sections 92-92F govern transfer pricing in India; APA scheme introduced via Finance Act, 2012; Safe Harbour Rules, 2013
- OECD/G20 BEPS Action Plan finalised: 2015; Actions 8-10 cover transfer pricing and value creation
- OECD/G20 Inclusive Framework on BEPS: 140-plus member jurisdictions; India adopted the Multilateral Instrument (MLI) in 2019
- Global minimum corporate tax under BEPS Pillar Two: 15%, agreed in principle in 2021
- BRICS membership: 10 countries as of 2025 (5 founding members plus Egypt, Ethiopia, Indonesia, Iran, UAE); accounts for about 45% of world population and 35% of global GDP (PPP)