The fundamentals of Transfer Pricing in Africa

At Graphene Economics, we’re privileged to assist a wide range of clients across disparate industries with their transfer pricing and cross-border transaction needs across the African continent. While we deal mainly with CFOs, heads of tax, tax teams, transfer pricing specialists and revenue authorities in our work, our work relates to many other areas of a business, from R&D and intellectual property through to operational strategy. Many of the people working in these areas will have had limited exposure to transfer pricing theory, so we have put together this guide on the fundamentals of transfer pricing in Africa to assist anyone looking for an overview.

We hope you find it useful!

Understanding Arm’s Length Principle

The arm’s length principle (ALP) is a fundamental concept in the field of transfer pricing, focusing on how multinational corporations set prices for transactions between their various entities in different countries. Its core concept involves pricing these transactions as if they were conducted between unrelated, independent parties in an open market. Key points to remember:

• Definition: The arm’s length principle ensures that intercompany transactions are priced fairly, reflecting what unrelated entities would agree upon in a similar market situation.
• Core concept: ALP emphasises market-based pricing, comparability with unrelated transactions, the use of transfer pricing methods, documentation, and compliance. Tax authorities play a vital role in enforcing this principle.
• Global standards: Many countries follow the guidelines provided by the OECD to maintain consistency in transfer pricing practices. The UN also provides practical guidance on how to apply the arm’s length principle.
• Consequences: Non-compliance can lead to penalties, disputes with tax authorities, and reputational damage.

In short, the arm’s length principle promotes transparency, fair pricing, and ethical business practices in the complex world of multinational corporations.

Application of Arm’s Length Principle in Intercompany Transactions

The OECD guidelines provide a 9-step approach to applying the ALP in intercompany transactions:

1. Understanding the Controlled Transaction: Identify the specific intercompany transactions, such as the sale of goods, provision of services, use of intangibles, or financing, and understand their nature and context.
2. Functional Analysis: Conduct a detailed analysis of the functions performed, assets employed, and risks assumed by each party involved in the transaction. This step is crucial for determining the economic substance of the transaction.
3. Selection of the Tested Party: Choose the tested party, which is typically the entity involved in the transaction that has the least complex functional profile and for which reliable comparables are more readily available.
4. Identification of potential comparables: Search for and identify potential comparables—uncontrolled transactions or entities that engage in similar activities under similar conditions. This helps establish a benchmark for arm’s length pricing.
5. Comparability analysis: Evaluate the comparability of the uncontrolled transactions or entities identified in Step 4. This analysis considers factors like the characteristics of goods or services, functions performed, contractual terms, economic circumstances, and business strategies.
6. Selection of the most appropriate transfer pricing method: Choose the transfer pricing method that most reliably applies the arm’s length principle to the controlled transaction. Methods include the Comparable Uncontrolled Price (CUP) method, Resale Price Method, Cost Plus Method, Transactional Net Margin Method (TNMM), and Profit Split Method.
7. Determination of the arm’s length range: Calculate an arm’s length range of prices or margins using the selected transfer pricing method and comparables. This range reflects the range of results that independent entities might achieve under similar circumstances.
8. Documentation and reporting: Prepare transfer pricing documentation that details the steps taken, methods used, and conclusions reached in applying the arm’s length principle. This documentation is critical for supporting the taxpayer’s position in case of audits or disputes.
9. Monitoring and reviewing: Regularly monitor and review the application of the transfer pricing policy to ensure it continues to align with the arm’s length principle and complies with relevant regulations, especially as business operations and market conditions evolve.

This 9-step approach helps multinational enterprises ensure that their intercompany transactions are priced in accordance with the arm’s length principle, minimising the risk of transfer pricing adjustments and disputes with tax authorities.

Key factors influencing arm’s length price determination

By carefully considering the factors below, companies can establish and support the arm’s length nature of their intercompany transactions, minimising the risk of transfer pricing disputes and adjustments by tax authorities.

1. Nature of the transaction: Understanding the specifics of the transaction, whether it involves the sale of goods, provision of services, transfer of intangibles, or financial arrangements.
2. Comparability analysis: Identifying and analysing comparable transactions between unrelated parties. This includes considering factors such as:
   1. Characteristics of property or services: Physical features, quality, and utility of the goods or services.
   2. Functions performed, risks assumed, and assets used (FAR Analysis): Assessing the functions performed by each party, the risks they assume, and the assets they employ in the transaction.
   3. Contractual terms: Examining the terms and conditions agreed upon by the parties, including payment terms, delivery conditions, and warranties.
   4. Economic circumstances: Considering the economic conditions in which the transaction takes place, such as market conditions, competitive environment, and geographic location.
   5. Business strategies: Reviewing the business strategies of the parties involved, such as market penetration, market share, and cost minimisation.
3. Transfer Pricing Methods: Selecting an appropriate method to determine the arm’s length price. Common methods include:
   1. Comparable Uncontrolled Price (CUP) Method;
   2. Resale Price Method (RPM);
   3. Cost Plus Method (CPM;
   4. Transactional Net Margin Method (TNMM); and
   5. Profit Split Method (PSM).
4. Use of Multiple Year Data: Evaluating data over multiple years to account for variations in economic cycles and business conditions, providing a more accurate and reliable comparison.
5. Adjustments for Differences: Making appropriate adjustments to account for any differences between the controlled and uncontrolled transactions that could affect the price or profitability.
6. Documentation and Compliance: Maintaining comprehensive documentation to support the determination of the arm’s length price, including details of the analysis performed, data used, and methodologies applied. This documentation is critical for demonstrating compliance with transfer pricing regulations to tax authorities.

Methods of Transfer Pricing

There are various methods of transfer pricing, each with its own strengths and limitations, and the choice of method depends on the nature of the transactions, availability of data, and the specific circumstances of the entities involved.

CUP method

Explanation: The CUP method compares the price charged for goods or services in a controlled transaction (between related parties) to the price charged in a comparable uncontrolled transaction (between independent parties). If the two transactions are sufficiently similar, the price in the uncontrolled transaction can be considered an arm’s length price for the controlled transaction. Adjustments may be made to account for differences in the transactions that could affect the price, such as product characteristics, contractual terms, market conditions, or geographic location.

Strengths: The CUP method is considered the most direct and reliable method when there are very similar transactions that can be used as a comparison. It reflects market conditions and actual transactions.

Practical application and challenges: It can be challenging to find truly comparable uncontrolled transactions, especially when dealing with unique goods or services, intangibles, or where there are significant differences in the transactions or economic conditions.

Resale price method

Explanation: This method starts with the resale price, which is the price at which a product purchased from a related party is resold to an independent party. The resale price is then reduced by an appropriate gross margin (known as the resale price margin), which represents the amount that the reseller would need to cover its operating expenses and earn a profit. The remaining amount after subtracting the resale price margin represents the arm’s length price that should have been paid to the related supplier.

Strengths: The Resale Price Method is useful when a distributor or reseller is involved and does not add significant value to the product. It is straightforward when reliable gross margin data for comparable uncontrolled transactions is available.

Limitations: This method is less effective when the reseller adds substantial value to the product through further processing or customization, or when there are significant differences between the controlled and uncontrolled transactions that affect gross margins.

Cost plus method

Explanation: The Cost Plus Method begins with the costs incurred by the supplier in a controlled transaction. A suitable markup is added to these costs to reflect what an independent entity would earn for providing similar goods or services. The sum of the costs and the markup represents the arm’s length price. This method is often used for manufacturing, assembly, or services provided by a related party.

Strengths: It is appropriate when a simple manufacturer or service provider adds a standard markup to costs and when comparable cost-plus data is available. It is especially useful in intercompany services and contract manufacturing arrangements.

Limitations: The method may not be suitable when the value added by the supplier is unique or when there are significant differences in the functions performed, risks assumed, or assets used that are not easily comparable. It also assumes that cost structures are similar, which may not always be the case.

Transactional net margin method

Explanation: TNMM examines the net profit margin relative to an appropriate base, such as costs, sales, or assets, that a taxpayer realizes from a controlled transaction. This margin is then compared to the net profit margins of comparable independent entities engaged in similar activities under similar conditions. TNMM is similar to the Resale Price and Cost Plus methods but focuses on net profit rather than gross margins.

Strengths: TNMM is less sensitive to transactional differences than the CUP method because it looks at net margins, which tend to be less volatile. It is useful when there are no close comparables for direct price comparison but when financial data on margins is available for similar companies.

Limitations: It is less direct than the CUP method because it does not compare specific transactions but overall profitability. It also relies on finding comparable companies that perform similar functions, assume similar risks, and operate in similar markets, which can sometimes be challenging.

Profit split method

Explanation: The Profit Split Method is used when transactions between related parties are highly integrated and cannot be evaluated separately. The combined profits from the controlled transactions are split between the parties based on their relative contributions, which can be determined using objective data (such as expenses, assets, or headcount) or subjective estimates. There are two main variations:

1. Contribution Analysis where profits are split based on each party’s relative contribution to the value creation; and
2. the Residual Analysis where routine profits are first allocated to each party based on standard returns, and any residual profit or loss is then split based on the parties’ contributions of unique and valuable intangibles.

Strengths: This method is particularly suitable for transactions involving intangibles, joint ventures, or integrated operations where it is difficult to separate the contributions of each party. It ensures that profits are allocated based on value creation.

Limitations: The Profit Split Method can be complex to apply due to the difficulty in measuring relative contributions and determining appropriate allocation keys. It also requires significant documentation and subjective judgment, which can lead to disputes with tax authorities.

Transfer pricing documentation

Transfer pricing documentation is a comprehensive set of documents that multinational enterprises (MNEs) must prepare and maintain to support their transfer pricing practices and demonstrate compliance with local tax laws and regulations. The documentation typically includes detailed information about the company’s organisational structure, business operations, and the methods used to determine arm’s length prices for transactions between related parties.

The documents include the following:

1. Master file: Provides a high-level overview of the MNE’s global business operations, including organisational structure, description of the business, intangibles, intercompany financial activities, and the MNE’s overall transfer pricing policies.
2. Local file: Contains detailed information about the local entity’s specific intercompany transactions, financial information, and comparability analysis. This includes descriptions of controlled transactions, the functions performed, assets used, risks assumed (FAR analysis), and selection and application of transfer pricing methods.
3. Country-by-Country Report (CbCR): Presents aggregated data on the global allocation of income, taxes paid, and certain indicators of economic activity among the countries in which the MNE operates. This report helps tax authorities assess transfer pricing risks and perform high-level transfer pricing assessments.

CbCR requirements

CbCR is part of the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan 13, aimed at enhancing transparency for tax administrations by providing them with information to conduct transfer pricing risk assessments and economic analysis. Key requirements include:

1. Scope: Applies to multinational enterprises (MNEs) with consolidated group revenue exceeding a certain threshold, typically €750 million or equivalent in local currency, in the preceding fiscal year.
2. Content: The CbCR must include the following information for each tax jurisdiction in which the MNE operates:
   • • Revenue from related and unrelated parties;
     • Profit (or loss) before income tax;
     • Income tax paid (on a cash basis) and accrued;
     • Stated capital and accumulated earnings;
     • Number of employees; and
     • Tangible assets other than cash and cash equivalents.
3. Constituent Entities: List of all constituent entities of the MNE group, including their tax jurisdictions and main business activities.

Objectives of CbCR

1. Transparency: Provide tax authorities with a clear view of the global allocation of income, taxes paid, and economic activity among jurisdictions.
2. Risk Assessment: Help tax authorities perform high-level transfer pricing risk assessments and identify areas where additional scrutiny may be necessary.
3. Tax Avoidance Mitigation: Address and mitigate base erosion and profit shifting (BEPS) by ensuring MNEs pay taxes in the jurisdictions where economic activities are performed and value is created.
4. Policy Making: Aid policymakers in understanding the global operations of MNEs and developing appropriate tax policies to combat BEPS.

Compliance and timelines for filing CbCR

Compliance:

1. Filing Entity: The ultimate parent entity of the MNE group typically files the CbCR. In some cases, a surrogate parent entity or other designated entity may file on behalf of the group.
2. Filing Mechanism: The report is usually filed with the tax authority of the jurisdiction where the ultimate parent entity is resident. Some countries may require local filing if certain conditions are met, such as the ultimate parent entity’s jurisdiction not having an information exchange agreement in place.
3. Language and Format: The report must be filed in the prescribed format and language, often specified by local tax authorities. The OECD has provided a standardized XML schema for CbCR to facilitate electronic filing and exchange of information.

Timelines:

1. Annual Filing: The CbCR must be filed annually, generally within 12 months after the end of the fiscal year of the ultimate parent entity.
2. Notification Requirements: Many jurisdictions require MNEs to notify their local tax authorities of the entity responsible for filing the CbCR. This notification is often due shortly after the end of the fiscal year, such as within the first few months.

 Impact of CbCR on transfer pricing risk assessment

 Enhanced Scrutiny

1. Holistic View: CbCR provides tax authorities with a comprehensive overview of the MNE’s global operations, enabling them to identify discrepancies and inconsistencies in the allocation of profits and taxes.
   • Identification of High-Risk Areas: By analysing the data in the CbCR, tax authorities can pinpoint jurisdictions where the MNE reports high profits but low taxes, or where substantial business activities do not align with the reported profits. This helps in identifying potential transfer pricing risks.
   • Benchmarking: Tax authorities can benchmark the MNE’s data against industry norms and peer companies to detect unusual patterns that may warrant further investigation.
2. Increased Compliance Requirements:
   • Documentation Alignment: The information in the CbCR must be consistent with the MNE’s transfer pricing documentation (Master File and Local File) and financial statements. Inconsistencies can raise red flags and lead to detailed audits.
   • Proactive Adjustments: MNEs may need to proactively adjust their transfer pricing policies to ensure alignment with the arm’s length principle, considering the data reported in the CbCR.
3. Potential for Dispute Resolution:

• • Cross-Jurisdictional Cooperation: The automatic exchange of CbCRs between tax authorities enhances cooperation and information sharing, which can lead to coordinated audits and investigations.
  • Mutual Agreement Procedures (MAP): CbCR data can be used in mutual agreement procedures to resolve disputes related to transfer pricing adjustments and double taxation, as tax authorities have access to consistent and comprehensive information.

Compliance and audit risks in transfer pricing

Key compliance challenges in transfer pricing

1. Thin capitalisation and debt pricing issues:
   • Thin capitalisation: This occurs when a company is financed through a relatively high level of debt compared to equity. Tax authorities scrutinise the interest payments on such debt, as excessive interest deductions can erode the taxable base.
   • Debt pricing: Determining the arm’s length nature of intercompany loans involves assessing interest rates, loan terms, and the borrowing entity’s creditworthiness. Incorrect pricing can lead to adjustments and penalties.
2. Intangible property and royalty payments:

• • Valuation of intangibles: Intangible assets like patents, trademarks, and proprietary technology are difficult to value due to their unique nature and potential for high profitability. The challenge lies in determining an appropriate arm’s length price for transfers or licensing of these assets.
  • Royalty payments: Ensuring that royalty payments between related parties reflect market rates requires careful analysis. Discrepancies can attract scrutiny, especially if royalties are paid to entities in low-tax jurisdictions.

3. Services and Management Fees:
   • Intra-group services: Determining the arm’s length price for services provided between related entities requires identifying the cost and value of services, and whether these services are actually rendered and beneficial.
   • Management fees: These fees must reflect the actual cost and value of managerial and administrative services. Tax authorities often question the necessity and arm’s length nature of these fees.

Transfer pricing audit process

Navigating transfer pricing compliance and audit risks requires a thorough understanding of key challenges, meticulous documentation, and proactive strategies. Thin capitalization, intangible property, and intra-group services are common areas of scrutiny. Understanding the audit selection process and preparing diligently can mitigate risks, while effective dispute resolution mechanisms are crucial for resolving issues and avoiding double taxation. By adhering to best practices and maintaining transparency, MNEs can effectively manage transfer pricing compliance and audit risks.

1. Understanding the audit selection process:
   • Risk assessment: Tax authorities typically use risk assessment criteria to select taxpayers for transfer pricing audits. This can include analysing financial ratios, discrepancies in reported profits and taxes, and CbCR data.
   • Targeted audits: Authorities may focus on specific industries or transactions that are prone to transfer pricing issues, such as high-value intangibles or significant intercompany financing.
2. Best practices for preparing for a transfer pricing audit:

• • Maintain comprehensive documentation: Ensure that all transfer pricing documentation (Master File, Local File, and CbCR) is complete, accurate, and readily available. This includes detailed functional analyses, comparability analyses, and justifications for the chosen transfer pricing methods.
  • Consistency: Ensure consistency between transfer pricing documentation, financial statements, and tax returns. Inconsistencies can trigger red flags during an audit.
  • Proactive compliance: Regularly review and update transfer pricing policies and documentation to reflect changes in business operations, market conditions, and regulatory requirements.
  • Engage with tax authorities: Maintain open and transparent communication with tax authorities. Respond promptly to information requests and provide clear and concise explanations.

3. Resolving transfer pricing disputes and double taxation:
   • Mutual Agreement Procedures (MAP): Engage in MAP to resolve disputes involving double taxation resulting from transfer pricing adjustments. This involves negotiation between the tax authorities of the affected jurisdictions.
   • Advance Pricing Agreements (APAs): Consider entering into APAs with tax authorities to obtain upfront agreement on the transfer pricing methodology for specific transactions, reducing the risk of future disputes.
   • Dispute resolution mechanisms: Use available dispute resolution mechanisms, such as arbitration or litigation, if negotiations with tax authorities fail to resolve the issue.
   • Documentation and evidence: Maintain robust documentation to support the arm’s length nature of transactions and prepare for potential litigation. This includes financial data, contracts, and any other relevant information.

Advance Pricing Agreements (APAs)

Advance Pricing Agreements (APAs) are formal arrangements between a taxpayer and a tax authority that set out the method for determining the transfer pricing of transactions between related parties over a fixed period. These agreements aim to provide certainty on the transfer pricing methodology to be applied in specified transactions, thereby minimizing the risk of disputes between taxpayers and tax authorities.

Benefits

• Certainty and predictability: APAs provide taxpayers with greater certainty regarding their transfer pricing arrangements. By agreeing on the pricing methodology in advance, companies can avoid unexpected tax adjustments and potential disputes with tax authorities.
• Reduction in compliance costs: With an APA in place, companies can streamline their documentation and compliance processes, reducing the need for extensive transfer pricing documentation for the covered transactions.
• Avoidance of double taxation: APAs can help prevent double taxation, as they often involve agreements between the tax authorities of two or more countries. This ensures that profits are not taxed twice, which is particularly beneficial for multinational corporations.
• Improved relationship with tax authorities: Entering into an APA can enhance a company’s relationship with tax authorities. By working collaboratively to agree on transfer pricing, both parties can build trust and improve communication.
• Proactive risk management: APAs allow companies to proactively manage their transfer pricing risks. By addressing potential issues before they arise, companies can mitigate the risk of future disputes and audits.
• Business certainty: APAs provide businesses with a stable tax environment, allowing them to focus on growth and investment without the distraction of potential tax controversies.

Types of APAs (unilateral, bilateral, and multilateral)

APAs can be categorised into three main types based on the parties involved:

1. Unilateral APAs: These agreements are between a single taxpayer and a single tax authority. They provide certainty regarding transfer pricing for the taxpayer but do not prevent double taxation, as they do not involve agreements with other tax jurisdictions
2. Bilateral APAs: These agreements involve two tax authorities—typically from the taxpayer’s home country and a foreign country where the related party is located. Bilateral APAs help in reducing the risk of double taxation by ensuring consistent transfer pricing treatment across both jurisdictions
3. Multilateral APAs: These are more complex agreements involving multiple tax authorities from different countries. Multilateral APAs aim to provide even broader certainty for multinational enterprises by ensuring that all parties involved have agreed upon the transfer pricing methods, thereby minimizing the risk of double or triple taxation

Each type of APA is designed to provide varying levels of certainty and dispute resolution mechanisms to accommodate the needs of different taxpayers and the complexities of international transactions.

Key Steps in the APA application and negotiation process

The process of applying for and negotiating an APA typically involves several key steps:

1. Pre-filing consultation: This is an initial meeting between the taxpayer and the tax authority to discuss the APA program, the transactions to be covered, and the specific requirements. It allows both parties to understand the scope and complexity of the proposed APA.
2. Formal APA application: After the pre-filing consultation, the taxpayer submits a formal APA application. This document includes detailed information about the taxpayer’s business, related party transactions, proposed transfer pricing methods, and relevant financial data.
3. Review and evaluation: The tax authority reviews the APA application in detail. This step often involves additional information requests and discussions to clarify specific aspects of the taxpayer’s proposed transfer pricing methods.
4. Negotiation: Once the application has been reviewed, both the taxpayer and the tax authority engage in negotiations to agree on the transfer pricing methods. For bilateral and multilateral APAs, this step also involves negotiations between the tax authorities of the relevant countries to ensure consistent treatment across jurisdictions.
5. Drafting the APA: After successful negotiations, the parties draft the APA document, which outlines the agreed-upon transfer pricing methods and any specific terms and conditions.
6. Finalisation and agreement: The final step is the formal signing of the APA by the taxpayer and the tax authority (and, in the case of bilateral or multilateral APAs, by the relevant foreign tax authorities). This agreement then becomes binding for the period covered, provided all conditions are met.

These steps ensure that both the taxpayer and the tax authority clearly understand the agreed transfer pricing methods, reducing the likelihood of future disputes and ensuring compliance.

Transfer pricing in the digital economy

The digital economy presents several unique challenges for transfer pricing due to the nature of digital business models and the complexities of determining where value is created and how profits should be allocated. These challenges include:

• Identifying value creation: In the digital space, value creation is often tied to intangible assets like software, data, and algorithms, which can be difficult to quantify and attribute to specific jurisdictions. Unlike traditional businesses, digital companies might generate significant value without a physical presence in a market, complicating transfer pricing analysis.
• Data and user contribution: Digital businesses often rely on user-generated data and network effects as key value drivers. However, determining the value of data collected from users in different countries and the contribution of users to the overall profit of the company poses significant challenges in applying traditional transfer pricing methods.
• Intangibles and intellectual property: The digital economy is heavily reliant on intellectual property (IP), such as patents, trademarks, and copyrights. The valuation and location of IP can be challenging, particularly when IP is developed and utilized across multiple jurisdictions, leading to complex transfer pricing considerations.
• Lack of comparable data: Finding suitable comparables for digital transactions is often difficult due to the unique and innovative nature of digital business models. This lack of comparability can make it challenging to apply standard transfer pricing methods based on external benchmarks.
• Evolving regulations: As tax authorities worldwide grapple with how to effectively tax digital businesses, the regulatory landscape is continuously evolving. This creates uncertainty for businesses in the digital economy, as they must constantly adapt their transfer pricing strategies to comply with changing regulations and guidelines.

These challenges highlight the need for updated transfer pricing approaches and international cooperation to address the complexities introduced by the digital economy effectively.

OECD and International Efforts to Address Digital Economy TP Issues

The digital economy has presented significant challenges for traditional transfer pricing (TP) rules, prompting international organisations like the OECD (Organisation for Economic Co-operation and Development) to act. The following outlines key OECD and international efforts to address these challenges:

•  BEPS Action Plan: The OECD’s Base Erosion and Profit Shifting (BEPS) project includes several actions aimed at preventing tax avoidance by multinational enterprises. Specifically, Action 1 focuses on addressing the tax challenges of the digital economy by proposing changes to the international tax framework to ensure that profits are taxed where economic activities generating the profits are performed and where value is created.
•  Unified Approach under Pillar One: As part of the OECD/G20 Inclusive Framework on BEPS, the Unified Approach under Pillar One seeks to reallocate some profits and taxing rights to jurisdictions where customers or users are located, regardless of a company’s physical presence. This approach aims to ensure a fairer distribution of tax revenue from digital businesses.
•  Pillar Two – Global Anti-Base Erosion (GloBE) Rules: Pillar Two introduces the GloBE rules to establish a global minimum tax rate. This effort seeks to prevent profit shifting to low-tax jurisdictions by ensuring that multinational enterprises pay a minimum level of tax on profits in every jurisdiction where they operate, thus addressing tax challenges exacerbated by digitalization.
•  Public consultation and consensus building: The OECD has actively engaged in public consultations and negotiations with member countries and other stakeholders to build a global consensus on how to effectively tax the digital economy. These consultations aim to balance the interests of different countries, particularly between developed and developing economies.
• Digital Services Taxes (DSTs): In the absence of a global consensus, some countries have introduced Digital Services Taxes as an interim measure to tax revenues generated by digital services within their jurisdictions. While DSTs address immediate tax concerns, they highlight the need for coordinated international efforts to avoid double taxation and trade disputes.

These efforts reflect the ongoing commitment of the OECD and the international community to develop a coherent and fair approach to taxing the digital economy, ensuring that tax systems keep pace with evolving business models and technological advancements.