IP cross-licensing/royalties is the biggest loophole when it comes to transfer pricing. The reason is pretty clear. There's usually no independent measure of v

IP cross-licensing/royalties is the biggest loophole when it comes to transfer pricing. The reason is pretty clear. There's usually no independent measure of value (because it's not like Apple/Nike/etc are licensing their brand to third parties) so it's very difficult for a tax authority to dispute the company's valuation concocted out of thin air. On the other hand, IP does cost money to develop, and it's often developed in one country but used in another. Presumably you wouldn't want to just remove IP tax-deductibility outright. It's such an absurdly exploitable loophole, though, that I'm beginning to take the view that intra-group licensing arrangements should basically be ignored for tax deductibility purposes. Under my revised framework, companies can still deduct consolidated IP costs, but only at the HQ level (i.e. not in between subsidiary groups). The end result would be Google Australia paying slightly more tax in Australia, but Google USA pays slightly less tax in the USA. I really don't see that as a problem, given how rapacious these companies have been at exploiting the existing arrangements. Interested to know if others have thoughts on this arrangement.