From data governance to operational readiness
How TP is changing and what MNEs need to do about it
In a recent two-part Fluid Talk webinar series hosted by fluid and Graphene Economics, speakers Chris Cochrane (fluid CEO), Michael Hewson (Graphene Economics founder) and April Nicholson (Graphene Economics executive director) explored how modern tax scrutiny is exposing a broader business challenge.
As revenue authorities become more sophisticated and multinational entities (MNEs) face growing reporting obligations, transfer pricing (TP) is increasingly testing organisations’ ability to govern, validate and explain the data that underpins their tax positions.
The first webinar focused on the fact that TP is no longer simply a documentation exercise. Increasingly, revenue authorities want to understand how decisions were implemented in practice, where the underlying data originated, and whether organisations can consistently reproduce and explain the outcomes reflected in their reporting.
A follow-up session explored the next logical question: if data governance is now critical, what does operational readiness actually look like?
According to Michael, one word repeatedly emerges in discussions with revenue authorities and tax tribunals across Africa: evidence.
“It’s one thing to have a transfer pricing policy or technical position,” he said. “It’s another thing entirely to prove why a decision was made, how a price was calculated, or what evidence exists to support a position several years later.”
The discussion highlighted a growing challenge facing many tax teams. During an audit, organisations are often required to retrieve invoices, agreements, calculations, emails and supporting documentation relating to transactions that took place many years ago. By that stage, employees may have moved on, systems may have changed, and supporting information may be spread across multiple repositories.
The result is that many disputes are no longer centred on technical TP principles alone. Instead, they increasingly focus on whether organisations can produce consistent, reliable evidence to support their positions.
Always-on audit readiness
The speakers argued that audit readiness should therefore not begin when a revenue authority letter arrives. Rather, it should be built into day-to-day operations.
For smaller organisations, this may be relatively straightforward. For larger groups operating across multiple countries and legal entities, however, the challenge becomes significantly more complex. As organisations grow, so does the need for structured processes, centralised information management and greater automation.
The webinar also explored the role of technology and artificial intelligence. While AI can assist with tasks such as data collection, monitoring and identifying anomalies, speakers cautioned against viewing technology as a solution in itself.
The panel noted that AI only becomes valuable when it is supported by good processes, strong governance and reliable data. Without those foundations, technology simply accelerates existing weaknesses.
Ultimately, the discussion concluded that operational readiness depends on several interconnected capabilities working together: governance, data management, implementation, monitoring and evidence retention.
The organisations best positioned to navigate future scrutiny are unlikely to be those producing the most documentation. Instead, they will be those that can clearly demonstrate how their policies were implemented, explain their data with confidence and provide evidence when questions arise.
As transfer pricing continues to evolve, we believe the challenge facing MNEs is becoming less about producing documents and more about creating operational systems capable of supporting them.
Visit the Fluid Talk resources page for the webinar recordings.
