Transfer Pricing Emerges As Key Indicator Of Regulatory Risk Amid Growing Data Scrutiny

Michael Hewson, founder and director of Graphene Economics.

Speaking during a recent fluid Talk webinar hosted by fluid and Graphene Economics, industry experts argued that transfer pricing has become a key indicator of this shift.

As revenue authorities become more sophisticated and interconnected, regulatory risk is increasingly tied to data integrity, operational visibility and an organisation's ability to withstand ongoing scrutiny.

“The environment has changed. This isn’t just business as usual,” said Chris Cochrane, founder and chief executive officer of fluid. “Governments are under pressure to raise revenue. Revenue authorities are becoming more technically capable. Information sharing between authorities is increasing, and technology is moving incredibly fast. All of this lands on the desk of the transfer pricing manager.”

According to Michael Hewson, founder and director of Graphene Economics, the shift is structural rather than cyclical. “Before Covid, engagements with revenue authorities generally happened in person,” he said. “Now our team regularly engages with revenue authorities virtually across multiple African countries. But alongside that change has come a lot more information, a lot more expectation, and much greater pressure on transfer pricing teams.”

That pressure increasingly extends beyond tax departments. Hewson noted that chief financial officers are now asking tax leaders how they plan to automate tax and TP processes, reflecting a growing recognition that tax risk is fundamentally linked to operational capability.

Beyond compliance to data confidence

One of the clearest themes emerging from the discussion was that many multinational organisations still struggle to access, validate and interpret their own data consistently across jurisdictions, entities and reporting systems.

“There’s been a shift away from compliance and ensuring documents and returns are merely submitted on time,” said April Nicholson, executive director at Graphene Economics. “The focus now is on the underlying data. How do you collate it, interpret it and provide it quickly and consistently to both the business and revenue authorities?”

The operational implications are significant. During one multi-year TP audit discussed during the session, a taxpayer received 11 separate information requests spanning five financial periods.

“Teams change, systems change, shared drives move,” Nicholson explained. “Now you’re trying to retrieve invoices, emails, general ledger records and KPIs from seven years ago, while ensuring that everything submitted in request one still aligns with request 11.”

The issue is not necessarily that companies lack data. The problem is that they often cannot reproduce it consistently, quickly or confidently.

That challenge becomes even more serious when revenue authorities increasingly have better analytical capability than taxpayers themselves.

TP audits in the age of AI

“Companies have been submitting TP documentation years before tools like ChatGPT existed,” said Hewson. “But revenue authorities in 2026 can now upload TP documentation, financial statements and integrated reports into AI-enabled systems and ask for summaries of transfer-pricing risks.”

In some cases, relatively minor inconsistencies can rapidly escalate. Hewson described a recent matter where a discrepancy between related-party disclosures in financial statements and figures disclosed in a tax return triggered allegations of potential fraud during a TP audit.

“The underlying TP values were correct,” he said. “But the related-party note in the financial statements had not been finalised correctly. Suddenly the discussion was no longer about transfer pricing. It became about credibility.”

The webinar also highlighted how disputes are becoming increasingly routine across Africa.

“In one case, as we were wrapping up one audit cycle, the next audit notification arrived almost immediately afterwards,” said Nicholson. “For many multinationals, audits are no longer occasional events. They’re becoming continuous.”

That reality is forcing companies to rethink how they approach transfer pricing operationally.

Real-time TP

Historically, TP has often been treated as a year-end exercise focused on documentation. But speakers argued that this reactive approach is becoming unsustainable in an environment characterised by ongoing audits, growing data demands and faster decision-making cycles.

Instead, they advocated for a more proactive TP operating model built around four core capabilities:

• Governance and policy stewardship
• Data foundation and traceability
• Monitoring and analytics
• Evidence and audit readiness

“We need to move from a reactive model to one where companies anticipate audits rather than simply respond to them,” said Hewson. “It’s about understanding what’s happening in the current year, not just documenting the previous one.”

Technology and AI are expected to play an increasingly important role in enabling this shift, particularly in automating repetitive tasks such as data ingestion, validation and anomaly detection. But speakers cautioned strongly against viewing AI as a substitute for human judgement.

“Technology can accelerate the process, but it can’t replace the underlying economic thinking,” said Nicholson. “You still need sound structures, governance and transfer-pricing expertise. Otherwise it’s just rubbish in, rubbish out.”

The discussion concluded that the companies most likely to succeed in this new environment will not necessarily be those with the most aggressive tax strategies or the largest compliance teams. Instead, they will be the organisations capable of creating operational clarity across complex multinational structures.

“Transfer pricing is no longer something that can sit in a year-end documentation process. The pressure is now operational,” Cochrane concluded.