specialists Paris (Spring 2002, Fall 2004, Winter 2005, Fall 2005, Spring 2006) and Geneva (Spring 2004) about topical issues including how to a allocate income of global banks, investment banks and insurance companies. As a member of the International Tax Committee of the U.S. Council of International Business (USCIB), Chris advised the USCIB on numerous transfer pricing issues and has served as a USCIB representative for the Business and Industry Advisory Committee (BIAC) to the OECD.
Prior to joining Ernst & Young, Chris worked for the Office of Chief Counsel, Internal Revenue Service (IRS) for over eleven years. Chris was a trial attorney and large case examination advisor for the IRS for seven years working on various tax matters, predominantly international tax litigation matters in Northern California (San Francisco and San Jose Districts). Chris was trial counsel in three major transfer pricing cases: Seagate v. Commissioner, 102 T.C. 149 (1994); National Semiconductor v. Commissioner, T.C. Memo. 1994- 195; and the Apple v. Commissioner arbitration. Chris spent his last four years with the IRS in Washington, D.C. serving as Special Counsel in the Office of Assistant Chief Counsel International. He was responsible for managing and coordinating the development of transfer pricing and international tax issues with international examiners, economists and trial attorneys throughout the United States. Chris also advised on numerous Competent Authority matters regarding transfer pricing issues. Finally, Chris served on the IRS’s transfer pricing penalty review committee where he was responsible for reviewing the legitimacy of proposed penalties regarding the inadequacy of taxpayer documentation under the contemporaneous documentation requirements of I.R.C. § 6662(e). Throughout Chris Faiferlick’s international tax career he has been affiliated with the following groups: Iowa State Bar, Bar of the United States Tax Court, Business and Industry Advisory Committee to the OECD, United States Council of International Business, International Taxation Committee and Member of Editorial Advisory Board of Internet Tax Advisor. Chris holds a B.S. in Economics from Iowa State University in 1985 and a JD with distinction from the University of Iowa in 1987.

CF - I am the Executive Director in Ernst & Young’s National Transfer Pricing Group Washington, D.C. I am primarily responsible for coordinating Ernst & Young’s input to the OECD regarding various transfer pricing related issues. I am also responsible for providing transfer pricing services to Ernst & Young’s financial services clients.

KJ - What issues are important to your clients?

CF - Clients seek the following input from their transfer pricing advisors:
• What does the company have to do to ensure it complies with the various transfer pricing regimes in which the company operates?
• How can the company meet its compliance obligations in a cost effective way?

CF - A tax executive managing the global transfer pricing function ultimately must be able to advise their CFO that they have reasonably accounted for all material transfer pricing risks around the world. The challenge is designing a transfer pricing system that is as acceptable as possible to the various tax administrations on a simultaneous basis.

KJ - What is your experience in America as compared to Europe and as compared to Asia Pacific regarding these transfer pricing environments?

CF - The tax administrations outside of the United States often do not share the same view as the IRS in what the arm's length standard means nor in its specific application to a particular company’s set of facts. This difference in perspective is what fundamentally leads to tax controversy for companies in most situations.


KJ - What changes are occurring in transfer pricing today?

CF - Enforcement of transfer pricing will continue to increase as more and more countries adopt transfer pricing rules and more importantly, learn how to enforce these rules. Tax administrations are also reviewing more carefully efforts by companies to manage their effective tax rate by locating part of their operations in jurisdictions with lower than average tax rates.

KJ - What future events do you expect in transfer pricing?

CF - I think you will see a constant refinement of transfer pricing guidance from the OECD and various countries, particularly those that perceive a decline in their tax base. Competent Authority cases will probably rise as a result.


KJ - What types of audit risks do companies face regarding transfer pricing?

CF - The primary risk relates to whether the local tax examiner believes that the company has an incentive to underreport income in his jurisdiction. If so, the examiner will question transfer pricing adjustments from his country’s perspective and may propose adjustments that are solely from this perspective. For example, instances where a company is restructured to undertake limited risk activity may lead an examiner to question whether the risk bearing is still de facto borne by the limited risk entity.

(KJ) Chris, thank you for the time you have taken to answer our questions. Your transfer pricing prospective is very valuable and we appreciate the time you have taken to share your perspectives with us.

Kathleen Jennings (KJ)
Editor, The Tax Intelligence Report
Kathleen@etsearch.com

Chris Faiferlick (CF)
Senior Tax Manger, Ernst & Young - Washington, D.C.
Chris.Faiferlick@ey.com