Hi everyone,

Good Morning!!!

Inside Scoop: Ex-PwC, Deloitte discuss growing Transfer Pricing opportunities

Hi, I am Himanshu Bhandari, a Transfer Pricing expert who’s worked at PwC, Deloitte, and Dhruva, and now leads TP at Aurtus Consulting, a boutique tax firm.

The Finance Story wanted an inside scoop on where we see opportunities for Transfer Pricing Professionals....this is what we are observing.

Transfer Pricing has shifted from a simple compliance activity - just ticking the box - to a critical strategic function discussed in boardrooms.

Why? The implications are significant, and in some cases, even extend to reputation risk. For instance: A major TP notice can quickly escalate into a public relations issue if it reaches the media.

Culturally, I’ve noticed a shift among MNCs operating in India. Earlier, companies aimed to keep margins thin in developing countries like India. Now, MNCs are willing to retain higher profit margins here.

This cultural shift has also been accompanied by an improvement in the quality of TP assessments by tax authorities.

The tax office now asks more mature questions, leveraging global documents, databases, and literature.

As a result, transfer pricing has transitioned from being predominantly compliance-driven to more advisory-focused.

Notable opportunities in Transfer Pricing:

• Strategic Shift: Transfer pricing has moved from mere compliance to a critical strategic function.

• Advisory Demand: Growing need for professionals to design efficient TP models, optimize tax structures, and manage global risks.

• Startups, are increasingly recognizing the importance of having robust TP models to avoid future disputes and ensure seamless global operations. (We work with a lot of Startups, it is a very competitive space but enough opportunities for all!)

• Investors, too, are paying closer attention to TP policies. For startups, especially those expanding internationally, having a sound TP model is crucial not only for compliance but also for building investor confidence.

• GCC Boom: Global Capability Centers (GCCs) in India are driving demand for in-house transfer pricing expertise.

Trump's Re-election! What Opportunities Can Be Tapped

• Ever since Donald Trump won his second term, questions have arisen about his potential impact on the global economy.

• We have Robin Banerjee, Chairman of Nucleon Research, to provide us with a picture of what this means.

Importance of the US in the Global Economy

• The US GDP stands at $29 trillion, accounting for 28% of global GDP ($105 trillion).
• This dominance makes the US a critical player in global trade, with the US dollar used in 70% of global transactions.
• In countries like India, 90% of imports and exports are conducted in US dollars, solidifying the US’s economic influence.

Impact of Donald Trump's Policies

• Higher Tariffs: Trump’s stance on increasing tariffs aims to boost US manufacturing, though its effectiveness is debated.
• Stricter Immigration Laws: Trump's immigration policies could affect sectors relying on immigrant labour, like agriculture, but high-skill jobs in tech may remain unaffected. This could also lead to fewer fake student visas and more opportunities for skilled Indian workers in the US.

Impact of US Immigration Policies on Indians

• Students: Genuine students pursuing higher education in reputable US institutions should face little disruption, but illegal or fraudulent student visas may decrease.
• Workers: High-skill workers in IT and tech may still find opportunities, but jobs requiring lower skills may be impacted. Additionally, stricter immigration could lead to a shortage of immigrant labour in agriculture, creating new job opportunities for Indians.

Indian Sectors Vulnerable to Trump's Tariffs

• IT Services: Likely unaffected, as India’s role in providing cost-effective back-office services is crucial.
• Gems and Jewelry: Tariffs on luxury goods may be imposed.
• Pharmaceuticals: The US relies heavily on Indian pharmaceuticals, making it unlikely that tariffs will significantly increase in this sector.
• Electronics, Textiles, and Engineering Goods: These sectors may face higher tariffs.
• Defense Exports: India’s defence sector could benefit from the US’s need for alternative suppliers due to its ongoing tensions with China.

Opportunities for India Amid US-China Decoupling

• As the US seeks alternatives to Chinese imports, India stands out as a key beneficiary due to its large population, growing economy, and success stories like Apple sourcing from India.
• India must improve ease of doing business, labour laws, and its legal system to attract more foreign investment and companies seeking alternatives to China.

Opportunities for CA Firms, CFOs, and Outsourcing Ventures

• Global Capability Centers (GCCs): India’s role as a hub for back-office services, including accounting and finance, is growing rapidly, with over 1700 GCCs in cities like Bangalore.
• CA Firms: Firms involved in back-office accounting, AI-driven accounting, and predictive analytics will continue to thrive.
• CFOs: CFOs will play a critical role in managing manufacturing setups and responding to the decoupling from China. A stronger US dollar could benefit Indian exports but may increase costs for imports.

That is it for today!!!

The Finance Story Team