Meanwhile, the spread and speed of cross-border dealings is leaving a widening gap between the economic and political arenas. From his vantage in the ivory tower of the Brookings Institution in Washington, analyst Wolfgang H. Reinicke sees a world in which government policy-makers can't keep pace. There's integration on the economic side, but multiple political arenas. As bureaucrats struggle to oversee the changes in the global financial and investment markets, multinationals face a messy web of clashing regulations on everything from taxes to labor to legal topics. Tax nightmare For James Mogle, a partner at Coopers and Lybrand LLP in Washington, that messy web of laws means seven-day work weeks and headaches as he tries to keep government tax collectors out of his clients' hair.
Corporations doing business in dozens of nations face a tax nightmare.
Sensitive issue Transfer pricing is the price a company puts on goods and services it sells to sister operations in other countries. The issue has always been sensitive as governments have long regarded prices charged by a parent company to a subsidiary, or the reverse, as a way to shift profits to countries with lower tax bases. Now, many tax officials are getting tougher on requiring companies to document their transfer pricing policies and prove they are consistent with the rates charged for similar services or goods by unrelated firms. The whole process has only gotten more complicated with globalization as multinationals import components from one country, assemble them in another and then ship them to yet a third. And the fact that many developing nations are still sorting out their tax laws and laying down rules to deal with the influx of new investment makes it even tougher for corporate clients.