Transfer Pricing OECD Anti-Abuse Rules on Intangibles Clash with Economics of Contracts. At Arm's Length, Who Has the Right to Intangibles’ Revenues When the Funder (Cash Box) of the Development Lacks Capability to Monitor the Developer's Activity?

OECD Transfer Pricing Guidelines (TPG), after 2015 BEPS documents, enforce the rule according to which the intangible funder is not allowed to gain intangibles' revenues when lacking ability to control the project development performed by other group companies.OECD rule has a primary anti-abuse target against highly capitalized companies (cash boxes) which reside in low Tax Countries and have no other activity than funding an intangible development, so assuming the role of residual claimant of group revenues.Despite what OECD affirms, we prove with support of Economics of contracts and analysis of three main Principal-Agent models, that the OECD rule is contrary to conditions that independent parties would agree upon in similar circumstances (the arm's length principle).In fact when the intangible's funder lacks the ability to monitor the performance of the intangible's developer, the arm's length contract must provide a developer's incentivizing variable remuneration which aligns both the funder's and the developer's interests, but the funder remains residual claimant of revenues. This scenario clashes with OECD rule.To summarize, the 2015 BEPS rules solve the problem of possible and perceived abuses through “cash boxes” but at the high price of radically altering the Arm's Length Principle (ALP), that no longer mimics what independent parties would agree upon in similar circumstances.Our proposition is regardless the issue, that we accept, that the company funding the intangible project must have a “level” of substance such to be not considered a “pure cash box” that is , it must exercise the capability to oversee risks managed by another; clear rules setting the said threshold are necessary