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Purpose -- This paper aims to examine the nature of Sarbanes-Oxley (SOX) costs incurred by subsidiaries of USA parent companies, and considers whether any value flows to non-USA subsidiaries. Deductibility is analysed under both the general deductibility provisions and the transfer pricing regimes of Australia and New Zealand (NZ). Reference is also made to the Organisation for Economic Cooperation and Development (OECD) transfer pricing guidelines and the US transfer pricing regulations. Australasian and New Zealand subsidiaries of US parent companies frequently incur costs related to their parent's regulatory reporting requirements under the Sarbanes-Oxley Act of 2002. Tax authorities, generally, view these costs as "shareholder activities", i.e. activities performed for the benefit of the parent only. As such, they are considered non-deductible to the subsidiaries of USA parents because an independent party dealing at arm's length would not pay to receive similar services. We consider circumstances in which some costs may be deductible. Design/methodology/approach -- Legal analysis. Findings -- We conclude that there can be circumstances where these so-called shareholder activities do provide value to subsidiaries and, accordingly, may (or should) be deductible in the local jurisdiction. Research limitations/implications -- This analysis is limited to a consideration of Australian, NZ, OECD and US sources. Practical implications -- This paper provides an analysis of the deductibility of a type of expenditure commonly encountered by subsidiaries of US parent companies. Originality/value -- Limited research is available that deals with this issue. In most cases, only general statements on deductibility of similar types of expenditure are available to taxpayers. [ABSTRACT FROM AUTHOR]

Business restructuring by multinationals has become increasingly prevalent as businesses seek to improve their profits through the location of business activities in countries with cheaper distribution, production, administration, or tax costs. This restructuring activity has been subject to increasing scrutiny from the OECD and tax authorities due to its potential impact on domestic tax bases. In particular, when profit-making activities are shifted from one jurisdiction to another, this can significantly alter the tax paid by multinational subsidiaries. Dominating the debate surrounding the tax issues are the transfer pricing implications of these reorganisations. This paper discusses the motivation behind international business restructures, including a review of some recent high profile examples, and considers why transfer pricing issues arise. Responses by the Australian and New Zealand tax authorities are examined, together with the OECD's report on the transfer pricing aspects of business restructuring and recent initiatives aimed at the issue of global profit shifting. [ABSTRACT FROM AUTHOR]