Warning To Multinationals: Your APAs Could Become Public

Jan. 13, 2005
Within the next two weeks, the U.S. Internal Revenue Service (IRS) is expected to begin a process that Ernst & Young LLP's Michael Patton says could result in parts of previously confidential business-tax pacts becoming public. At issue are 130 advance ...

Within the next two weeks, the U.S. Internal Revenue Service (IRS) is expected to begin a process that Ernst & Young LLP's Michael Patton says could result in parts of previously confidential business-tax pacts becoming public. At issue are 130 advance pricing agreements (APAs), arrangements among companies, foreign governments, and the IRS that deal with transfer payments for goods, services, and technology among affiliated companies in different countries. "Basically, a process is starting that eventually could end up with not only the agreements, but all the background files -- with redactions making them look like Swiss cheese -- out on the street," warns Long Beach, Calif.-based Patton, the national director of Ernst & Young's advance pricing agreement program. For companies with APAs, "the immediate problem is that they're going to go through a process that they were assured wasn't going to happen. They were assured when they entered into these agreements that everything would be kept confidential," states Patton. Meanwhile he's heading a coalition to protect the privacy of APAs -- something to which he says the IRS is not now receptive.

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