Danilack Speaks to U.S. Policy on Negotiating APAs with India

  In the Nov. 29 issue of Bloomberg BNA’s Transfer Pricing Report, Michael Danilack, the U.S. Competent Authority, confirmed that he is cautious about endorsing advance pricing agreements with India—and gave his reasons for that position.

  Danilack’s comments follow on remarks of Mark Freed of Intel, who in Octoberthat his company is interested in being a test case for a U.S.-India APA. Even as he expressed willingness to seek such an APA, Freed said he understood the United States currently is not entertaining requests for APAs with India and that he believed the issue was unresolved double tax cases.

  Danilack’s remarks, given Nov. 28, indicate that the United States does not view India’s new APA program as a cure for a troubled competent authority relationship.

  Danilack spoke of the need for “a good workingrelationship with your counterpart” in competent authority negotiations, in which “you both need to be inclined towards resolution on a principled basis.” The IRS, he said, has established that relationship with some countries, “but with others not so much. We can do a lot better.” 

An APA program alone “does not change that dynamic,” nor does it resolve the most serious questions that might arise in working with another jurisdiction, according to Danilack: 

 “Yes, it is another mode of sitting down and talking about cases, but there is nothing promising in an APA per se in terms of actually being able to get to principled resolutions. The reason that I have been very cautious about saying that the U.S. has a strong interest in a bilateral APA exercise with India is that I am not confident at the moment we will have a process such that two years from now we won't all be wringing our hands about how these resolutions are ever going to come into play. I am not confident about that because I have not seen packaged with the promising statements coming out of India about its APA program any statements indicating that the relationship will be reset, or that, in the APA context, the principles used will be moderated. There should be more discussion in terms of what does an APA really promise as an ultimate resolution? Is it truly going to be the way forward bilaterally?”

Challenges and opportunities associated with APAs will be the subject of a panel discussion at the Bloomberg BNA-Baker & McKenzie Global Transfer Pricing Conference in Paris March 11-12. To register, visit http://bit.ly/UpPfTf

Molly Moses

Managing Editor, Transfer Pricing Report