Artificial Intelligence in Transfer Pricing: A New Frontier for Tax Authorities?

Abstract

The application of Artificial Intelligence (AI) in transfer pricing has emerged as a revolutionary approach, providing tax authorities with advanced tools for ensuring compliance, reducing errors, and enhancing audit capabilities. Transfer pricing, the practice of setting prices for transactions between related entities in multinational corporations, has long been a complex issue in global taxation. As AI technology continues to evolve, its role in transfer pricing is becoming increasingly significant. This paper examines the opportunities, challenges, and implications of AI in transfer pricing, focusing on how tax authorities can leverage these technologies to optimize tax collection, minimize disputes, and improve transparency. We explore the technical aspects of AI in data processing, pattern recognition, and predictive analytics, as well as the legal, ethical, and operational concerns. Ultimately, AI offers promising solutions but also raises new questions about fairness, control, and regulatory standards in international taxation.