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Africa

The vision of Satoshi Nakamoto for Bitcoin to promote financial inclusivity has more likely been met considering the boom of the crypto market in third world countries such as those in Africa. It is noteworthy that the daddy of all cryptocurrencies was created so that there would be a chance for outsiders to gain access to an informal financial system with a digital platform. No wonder it has opened investment opportunities on trading platforms such as the BitiQ website for the African people renowned for using cryptocurrencies.

A report has recently claimed that Africa has become the global leader in terms of cryptocurrency adoption. Despite attempts of the government to restrict operations by mandating banking institutions to cut ties with crypto exchanges, the market was able to survive with a shift into a platform that no longer needs local banks as intermediaries. And the crypto market has flourished since then, away from state regulations. It appears that the free market is working at the advantage of African investors. 

East Asia

While Africa is still in the phase of adopting cryptocurrencies, perhaps it would be fair to say that Asia has already been immersed in this market. A study conducted last year claimed that over 30% of crypto transactions took place in East Asia, which includes China, Japan and South Korea. The trend is expected to carry on as countries in other parts of Asia are being drawn into the market. It would buffer the impact of China now shutting its doors to foreign cryptocurrencies.

Moreover, Japan has been among the most progressive countries in Asia to embrace opportunities brought about by crypto trading. It has managed to strengthen laws to protect the local crypto market from cybercrimes in the likes of hacking and money laundering. There has also been a regulation of crypto exchanges through documentary requirements that would prove legitimacy. More likely, this will be an additional layer of protection taken as a preventive measure to deter cyber crypto heists. 

Latin America 

It can be recalled that the founder of this cryptocurrency originally intended the use of virtual money as a medium of exchange. Following the historic move of El Salvador declaring Bitcoin as an official legal tender in the country, there is so much expectation hanging over its shoulders. The government anticipates economic growth brought about by overseas remittances in the form of Bitcoin. Besides, it is a practical approach for a developing country with people devoid of access to the financial system.  

Paraguay is set to follow in the footsteps of its neighbour with the intention recently made known by one of its lawmakers. A bill has been submitted in Congress to legitimise the use of Bitcoin as an official legal tender. The legislation intends to bank on the financial opportunities drawn by the crypto market. Like El Salvador, the nation is poised to become the next crypto hub in the region. 

United States of America

America has been the ultimate hub of cryptocurrencies, with Bitcoin finding its roots in San Diego, California.  From paying for some Papa John’s pizza, there is no doubt that the father of all cryptocurrencies has come a long way. It is considered the market leader after gaining a huge number of followers still on board. The United States is now facing challenges on how to best regulate the crypto market to protect investors. As the SEC Chairperson has put it, he is neutral in terms of technology but not in terms of consumer protection. 

Consequently, the Chairman of the Federal Reserve has already expressed his intention to promote crypto regulations. He is advocating for the possibility of digital banknotes and stable coins to compete with cryptocurrencies. These virtual currencies would be backed by the government’s financial system to draw the interest of investors, given the relatively low risks. 

Conclusion

This is how the crypto market has taken the world one region after another all through the years from the United States, Latin America, East Asia, and Africa.

Luis Ugarelli is Managing Partner at Market Facilitators, an economic consulting facility with main offices in Lima, Peru. The company provides consulting services, advisory and economic studies for different sectors in key economic variables to foster competitiveness and development. Finance Monthly speaks to Luis about the Peruvian transfer pricing system.

 

Can you explain how the Peruvian transfer pricing system works? What type of documentation does a company have to prepare?

Arms’ length principles were incorporated in Peruvian Legislation in 2001. As the country is aspiring to join the OECD in the near future, Peru has been trying to follow OECD directives very closely. For instance, some of the BEPS actions have already been implemented. The size of the companies, measured by the level of sales (above US$3 million) plus the volume of controlled transactions (purchases plus sales above US$500 M), trigger the presentation of Local File. As of 2017, a condition to make deductible services received from related parties or tax heavens must pass the benefit test. Master Files apply for consolidated turnover of groups above US$27 million. CbC Reports would eventually reach around 10 Peruvian Multinational Groups only. BEPS reports in Peru are sworn informative declarations that may trigger voluntary or compulsory tax adjustments only when results prove to be detrimental for the treasury.

 

What are the potential penalties for companies if they fail to submit accurate information regarding transfer pricing? Is there an appeal process?

If company fails to present a Local File by due date each year (with the exception of this year, as taxpayers are expected to submit year 2016 in April 2018 and year 2017 in June 2018), fines for not complying are 0.6% of a company’s sales with a ceiling of US$32 thousand by report. The fines are the same if the filing is partial or inaccurate and applies to master files and CbC reports as well. There is a progressive fine reduction for voluntary filing as long as the taxpayer declares it before a transfer pricing audit is open. As conditions requested for the benefit test appear to be excessive, some companies are assuming that these expenses will be repaired on their income tax declaration. Resolutions as a result of transfer pricing audit may be appealed in three instances and may end up in the Tax Court.

 

What is the Peruvian Tax Authority’s current approach to transfer pricing? How often do they carry out audits?

Statute of limitations of tax obligations is five years. Although tax audits have not followed a particular pattern, some partial audits in transfer pricing have been carried out in the last three years, but have resulted in disputed items that may end up in the Tax Court. Since the government has observed a dramatic tax collection drop in the last five years, part of the blame goes to controlled transactions. Therefore, tax authorities are betting that the situation could be partially reversed with a closer attention and audits to transfer pricing matters. Parameters to define taxpayers under formal obligations have been raised and more revelation is asked, with the intention of focusing on a smaller number of taxpayers (a drop from 6,500 to 3,500) in material transactions with commodities and imports, particularly medicines, consumer goods, capital goods, grains; and in intra-group services and financial operations of all economic sectors.

 

How do you best help companies manage their transfer pricing issues and what services do you provide?

For Peruvian companies with significant transfer pricing operations, early advice and transfer pricing planning is by far the most effective approach for timely problem recognition and resolution – the sooner, the merrier, as I like to say. Companies do not need to act like they’re blindfolded regarding the market prices for specific material transactions they execute - for those purposes we do comprehensive benchmarking analysis of interest rates, royalties, rents, cost, etc. In some cases, an entire revamping of the controlled transactions is advisable, and this reshuffle can make wonders for the development of a streamlined operation and present a clear and transparent position before the tax authorities.

 

Contact details:

Email: luis.ugarelli@marketfacilitators.com

Website: www.marketfacilitators.com

In Latin America, the Big Data and Analytics (BDA) market is gaining pace and undergoing an intense evolution. Innovative business models such as Internet of Things and cloud computing are transforming the market and creating new ways to collect data and improve data storage processes. In addition, companies in the region are becoming more familiar with the concepts and benefits of adopting and implementing BDA solutions.

"Exponential data growth fuelled by connected devices has compelled organizations to revisit their ability to use Big Data to make more intelligent, real-time decisions. Considering the hyper-competitive business environment, this critical need has given rise to a new breed of analytics solutions focused on prediction, data visualization, and dynamic decision making," said Frost & Sullivan Digital Transformation Consulting and Research Director Renato Pasquini. "Technology providers such as IBM, Oracle, SAP, SAS and Teradata are market leaders and have focused on providing solutions for real-time analysis in the Latin American BDA market."

Latin America Big Data and Analytics Market, Forecast to 2022, is part of Frost & Sullivan's IT Services & Applications Growth Partnership Subscription. The total BDA market in Latin America earned $2.48 billion in revenues in 2016. Led by Brazil and Mexico, and driven by digital transformation, the market is expected to reach $7.41 billion in 2022.

Integrating a secure BDA solution into existing legacy infrastructure remains a key challenge, along with acquiring and sourcing talent for analytical and technical skills. Nevertheless, companies are realizing that they need to invest in BDA solutions and find innovative solutions to overcome these challenges in order to remain competitive in a dynamically evolving ecosystem.

Other developments include:

"Hadoop is becoming the standard for the majority of Big Data projects. This is due to its disruptive characteristics such as open source, free, scalable, low cost and fault tolerance. Once cloud and Hadoop are compatible it would make sense to run them together as they both focus on reliability and scalability at a reasonable price point, which is essential for BDA solutions," noted Pasquini.

(Source: Frost & Sullivan)

Currency devaluations and stretched information technology (IT) budgets have led Latin American companies to respond by prioritizing cost containment and measures to improve productivity and operational efficiencies. Meanwhile, key contact centre companies in the market have made their move towards increasing their portfolio and adding cloud contact centre solutions.

"On-premise system suppliers will strive to introduce cloud and hybrid-based options to keep pace in an increasingly competitive market," said Customer Contact Senior Industry Analyst Maiara Munhoz.

"For instance, Genesys's purchase of Interactive Intelligence's cloud portfolio and enterprise communications components highlights portfolio expansion and provides the former a competitive edge over Avaya."

Latin American Contact Centre Systems Market, Forecast to 2021, new analysis from Frost & Sullivan's Customer Contact Growth Partnership Service program, examines the scope of business transformation across different industry verticals and analyses how innovative solutions will take over the market. The subscription also explores growth opportunity areas such as social media tools, cloud solutions, omni-channel customer experience, automation via artificial intelligence and virtual agents/advisors.

Key regional insights include:

"Omnichannel solutions must aim to provide proactive customer service that is 'informed' by real-time data and predict customer behaviour in order to change offers and provide service in real time," noted Munhoz. "They must also incorporate other data sources for better clarity about the customer, provide real-time guidance capabilities for agents in complex customer support scenarios, and improve agent performance."

Latin American telcos are looking forward to augmenting efficiency and reduce costs. In this context, use of artificial intelligence (AI) and natural language processing (NLP) technology will see increasing adoption through a range of applications such as speech recognition, speech analytics, biometrics and robotic process automation.

(Source: Frost & Sullivan)

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