Utilizing Baseball Arbitration for Transfer Pricing Tax Disputes in Canada: Current Trends and Future Perspectives

While baseball arbitration has been recognized as a method for settling international tax disagreements, this paper concentrates on one of the most debated issues in tax treaty conflicts: transfer pricing. Emphasizing transfer pricing in cross-border tax disputes highlights its increasing importance and significant consequences for both tax authorities and corporate taxpayers. The study explores the possible use of baseball arbitration to resolve transfer pricing disagreements in Canada, referencing best practices from the United States, the OECD, and the United Nations tax treaty models. Results suggest that the traditional baseball arbitration model may not be appropriate for all transfer pricing cases, especially those with major policy implications. To overcome this challenge, the paper proposes a modified version called “Baseball Arbitration Plus” (BAP), which involves a three-step process. This new approach could greatly influence tax policy, especially regarding the interpretation of existing tax treaties.