Caroline Silberztein believes the arm’s-length principle does have weaknesses, but is still the best available standard.

“Until we have a better, simpler and fairer alternative, then we are going to stay with the arm’s-length principle,” said Silberztein at International Tax Review’s Global Transfer Pricing Forum.

Silberztein said that the OECD is “not ready” for formulary apportionment to replace the standard, which the OECD's transfer pricing guidelines are based on.

The formulary apportionment approach uses a taxpayer’s business income divided among the countries in which it does business. A formula would be used to generate an apportionment percentage that is based on the relative amount of a taxpayer’s activities in each jurisdiction.

Silberztein highlighted finding reliable comparables, maintaining taxpayer certainty andthe need to establish a global consensus on the application of  transfer pricing rules as three of the biggest weaknesses of the arm’s-length principle.

“The biggest challenge is that we [the OECD] do not have a global reach. This is a problem because business is global and we are being hindered by the lack of a meaningful consensus.

“Transfer pricing is not an exact science,” said Silberztein.