Total E&P Norge AS (Total) is engaged in petroleum exploration and production activities on the Norwegian Continental Shelf. Income from such activities is subject to a special petroleum tax, in addition to the normal corporate tax, resulting in a total nominal tax rate of 78%. In 2002-2007, Total sold gas to the controlled trading companies, and the trading companies resold the gas to third parties on the open market.
The Supreme Court concluded that Total did not have a right to full access to the comparables. Although section 3-13 (4) of the Tax Assessment Act states that information subject to confidentiality may be given to third parties with the effect that such third parties are subject to the same duty of confidentiality, this rule could not, according to the Supreme Court, be applied in the present case. This was because the very point of the confidentiality obligation in this case was to avoid business secrets’ being shared with competitors such as Total.
“If the pricing of internal sales shall be deviated, the tax authorities shall still be bound by the general rules in the General Tax Act and the Tax Assessment Act, including the guidelines from the OECD on transfer pricing, which do not prohibit the use of information unknown to the taxpayer, but do call for caution as to how the information is used, so that the taxpayer is given a reasonable opportunity to defend itself, and judicial oversight is ensured.”
Further, the Supreme Court found justification for its understanding in a Norwegian article of B. Thu-Gundersen in, Skatteprosess (Ole Gjems-Onstad and Hugo Matre eds., Gyldendal 2010), at 93, on the use of secret comparables, which states as follows:
“The comment regarding secret comparables [in the 2010 OECD Guidelines] has, in other words, received a more central placement, and is applicable to all transfer pricing methods. Based on the discussion in the White Paper one can, as before, read the statement as a lowest common denominator of very different points of view. The comment does not appear to state that secret comparables are not allowed, but serves as a warning and call for caution so that the interests of each taxpayer are protected in a reasonable manner.”
The Supreme Court unanimously upheld the tax assessment and ruled in favour of the tax authorities.