MercoPress. South Atlantic News Agency

New pricing system puts Brazil closer to joining OECD, says Guedes

The new system will avoid both double taxation and tax evasion, Guedes explained

Brazil's Economy Minister Paulo Guedes Tuesday said his country was a step closer to joining the Organization for Economic Cooperation and Development (OECD) after a new transfer pricing system was introduced.

The transfer pricing system is a procedure whereby multinationals move profits from one country to another, usually from their subsidiaries to the parent company, or to countries where legislation allows for more favorable tax treatment, such as tax havens.

According to Brazil's Economy Ministry, the new transfer pricing system is the result of a project started in 2018, “which examined the similarities and differences between the Brazilian and OECD transfer pricing approaches and resulted in the convergence report to OECD standards.”

“The old system left open the possibility of double taxation, which would hit European companies that wanted to invest in Brazil,” the Ministry also explained.

It also made tax evasion possible, Guedes insisted on launching the new method.

“Today's great advance will avoid two evils: that of excessive taxation, which prevents investments; and the evil of evasion, by transferring profits to legislations that have more favorable taxation,” he added.

According to Guedes, the global community “embraces” itself through these practices. “I want to emphasize the special moment in which this happens,” he said as he recalled that the negotiation of the new global tax agreement “is a minimum tax on large multinationals.”

He reaffirmed that Brazil is “quite advanced in this final stretch of access to the OECD,” and that the step taken Tuesday was “decisive,” since it helps the country converge with international standards.

“We want, with this initial step in the new system, to lubricate the investment channels for Brazil to benefit from the investments that Europe will make in search of new areas of investment for energy and food security,” he argued, after citing the current geopolitical scenario of that continent amid political pressures, economic sanctions, and ruptures aggravated by the war between Russia and Ukraine.

(Source: Agencia Brasil)