Mr. Philip Kermode:

They are effectively OECD standards established through the OECD model tax convention and its commentary. It is clearly a very complex issue because it is all based on the concept of arms length pricing, that is, attempting to define arms length pricing between related members of a group. It has been well known for many years that this is a source of added cost to businesses as well as being an area open to manipulation, particularly when one considers the use of intellectual property rights. In practical terms, the Commission has been working for a number of years on trying to simplify the procedures on transfer pricing under a joint transfer pricing forum which brings together business and administration. Some of the work of this forum has been fed back into the OECD, particularly on documentation, master files and local files, in an attempt to bring a little bit of standardised practice to what goes on. While standards have been established in the OECD, they are implemented through bilateral agreements between individual jurisdictions based on the model tax convention.