Tag: Domestic prices

Philippines vs Avon Products MFG., INC., January 2005, Tax Court, CTA CASE No. 5908

Philippines vs Avon Products MFG., INC., January 2005, Tax Court, CTA CASE No. 5908

Avon Products exported products to related parties at lower price than charged when sold domestically. The tax authorities issued an assessment where the export prices had been adjusted. Judgement of the Tax Court The Court decided in favour of Avon Products. According to the court the initial burden to prove that the pricing of inter-company transactions complies with the arm’s-length principle lies with the taxpayer. However, once sufficient proof is provided, the burden shifts, and the revenue authority must then prove that the adjustment is sufficiently supported. Before the court Avon argued that the export and domestic markets were two different markets. The export market was very competitive while the domestic market was a captured market due to an exclusive Supply Agreement with AVON Cosmetics, Inc. Avon also argued that export sales maximized the productivity level which in turn lowers unit cost of production as the fixed overhead was spread over a larger number of product units. Excerpts: “This Court ... Read more