On August 6, the Inflation Reduction Act of 2022 was passed by the U.S. Senate. This Act has allocated $80 billion to the Internal Revenue Service (IRS) for tax collection to increase transfer pricing audits.
1. Transfer Pricing Litigation
The Inflation Reduction Act’s allocation of funds to the IRS for tax collection enables taxpayers to understand current transfer pricing litigation and how these relate to their transactions.
2. Increased scrutiny
Multi-nationals and large corporations could be subject to stricter audits regarding their tax returns, including scrutiny of their transfer pricing positions.
On the other hand, they will look to invest in data analyses or other assessment tools to collect data from Country-by-Country reports. Subsequently, use it in transfer pricing risk assessments.
In addition, the IRS could use its additional resources to assess new transfer pricing issues and expand its caseload.
Source: IRS 18/10/22