Hastings International and Comparative Law Review


Tax policy influences the ability of United States businesses to compete internationally. The 1986 Tax Reform Act amended section 482 of the Internal Revenue Code, imposing on United States corporations a new standard for pricing intercompany transfers of intangibles. This new standard deviates from the traditional arm's length standard. It is strict and unpredictable, creating taxpayer uncertainty and discouraging corporations from investing abroad. In contrast to the United States, Japan's tax policy attempts to alleviate uncertainty and double taxation. This Note compares Japanese and United States tax policies to demonstrate the detrimental impact the amendment to section 482 will have on the competitiveness of United States business and the advantages of a universal arm's length pricing standard.