Transfer pricing disputes ‘disproportionately’ burden developing nations: Sitharaman
At a meeting of BRICS heads of tax authorities held in New Delhi, the Ministry of Finance stated that transfer pricing disputes "disproportionately" burden developing-country tax administrations, noting that revenue frameworks not suited to their fiscal realities distort perceptions of these economies.
India proposed setting up two new BRICS working groups: one on International Taxation and Transfer Pricing, and another on Revenue Statistics, to give BRICS members a shared platform on treaty interpretation, transfer pricing audits, and measurement frameworks reflecting BRICS economic realities.
The Ministry linked this push to the ongoing negotiation of the UN Framework Convention on International Tax Cooperation, describing the coming years as pivotal in shaping cross-border tax rules and calling for a collective BRICS voice in that process.
Officials from the Department of Revenue provided technical detail on the working groups' scope following two days of expert-level review among BRICS tax authorities.
UN Framework Convention on International Tax Cooperation (UNFCITC)
The UNFCITC is a proposed multilateral tax treaty being negotiated under UN auspices, intended to give all countries — not only OECD members — an equal seat in setting global tax rules. It emerged from developing-country dissatisfaction that the dominant international tax architecture (the OECD/G20 BEPS Inclusive Framework) was designed primarily around advanced-economy structures.
Key Details
- The UN General Assembly adopted Resolution 77/244 in December 2022, establishing an Intergovernmental Negotiating Committee (INC) to draft the convention.
- Resolution 78/230 (December 2023) set up an Ad Hoc Committee to prepare Terms of Reference, which were adopted in December 2024 with endorsement from 110 UN member states.
- Formal negotiations began in early 2025 and are expected to run through 2027; two early protocols are being negotiated alongside the main convention — one on taxation of cross-border services and another on dispute prevention and resolution.
India's call for BRICS coordination on transfer pricing is explicitly framed as preparation for these UNFCITC negotiations, where BRICS nations aim to secure a stronger collective voice than they held in the earlier OECD-led process.
UN Tax Committee / UNFCITC vs OECD Framework — the Developing-Country Divide
Two competing institutional tracks currently govern international tax cooperation: the OECD-led framework (BEPS Inclusive Framework, Pillar One/Pillar Two) historically dominated by advanced economies where India participates as a member of the 140-plus country Inclusive Framework, and the newer UN-led track (UN Tax Committee, now evolving into UNFCITC) where every UN member state has an equal vote regardless of economic size. Developing countries have long argued the OECD process under-weights their interests as "source" jurisdictions (where investment and extraction happen) versus "residence" jurisdictions (where multinational headquarters are based).
Key Details
- The OECD Inclusive Framework operates by consensus among member jurisdictions, which critics argue lets a small set of major economies effectively set the agenda.
- The UN Tax Committee (formally the Committee of Experts on International Cooperation in Tax Matters) has operated since 2004 as a subsidiary body of ECOSOC, producing the UN Model Double Taxation Convention as an alternative to the OECD Model.
- The shift toward a binding UNFCITC (voted through the UN General Assembly, one-country-one-vote) marks an attempt to formalize UN tax rule-making beyond the advisory UN Model Convention.
The Ministry's remarks about revenue frameworks not fitting developing-country "fiscal realities" is a direct restatement of the source-versus-residence critique that underlies the push toward a UN-anchored (rather than purely OECD-anchored) tax architecture.
Mutual Agreement Procedure (MAP) and Cross-Border Tax Dispute Resolution
The Mutual Agreement Procedure is a treaty-based dispute-resolution mechanism, incorporated under Article 25 of the OECD Model Tax Convention and mirrored in India's Double Taxation Avoidance Agreements (DTAAs), through which the "Competent Authorities" of two treaty countries negotiate to resolve double-taxation disputes, including transfer pricing adjustments. In India, the Competent Authority function is administered by the Foreign Tax & Tax Research (FT&TR) Division under the Central Board of Direct Taxes (CBDT).
Key Details
- MAP relief requires mutual consent between the two countries' Competent Authorities; it cannot be unilaterally imposed on the taxpayer.
- Per OECD MAP statistics, transfer pricing disputes take an average of roughly 31 months to resolve globally, among the slowest categories of MAP cases — supporting the claim that such disputes disproportionately burden under-resourced developing-country tax administrations.
- India separately introduced Advance Pricing Agreements (APAs) via the Finance Act, 2012, allowing taxpayers to agree a transfer pricing methodology with authorities in advance, reducing future MAP caseload.
The proposed BRICS Working Group on International Taxation and Transfer Pricing is intended partly to pool experience on exactly these mechanisms (MAP, APA) so that developing-country tax administrations, which typically have fewer specialists to handle lengthy MAP negotiations, are not structurally disadvantaged.
- BRICS heads of Tax authorities meeting: New Delhi, September 23, 2026; India proposed two new working groups (International Taxation and Transfer Pricing; Revenue Statistics).
- UNFCITC: INC established by UNGA Resolution 77/244 (December 2022); Terms of Reference adopted December 2024 (110 member states); negotiations run 2025-2027.
- Global average MAP resolution time: about 27.4 months overall; transfer pricing cases average about 30.9 months (OECD 2024 statistics).
- Transfer pricing in India: Income Tax Act, 1961, Sections 92-92F (arm's length price); APA scheme introduced via Finance Act, 2012.
- BRICS will hold its rotating presidency under India in 2026, with China set to assume the presidency in 2027.