Plain English
Sometimes a tax authority pushes back on a transfer pricing position using its own comparables — often drawn from confidential audit files of other taxpayers, or from proprietary access to data the public cannot see — without telling you exactly which companies or transactions it used. That is a secret comparable. It puts the taxpayer at a serious disadvantage, because you cannot rebut evidence you cannot see, and the OECD Guidelines expressly caution against relying on data that is not disclosed to the taxpayer being assessed.
Technical definition
Comparable data used by a tax administration in a transfer pricing examination that is not made available, in whole or in significant part, to the taxpayer under examination, typically because it derives from other taxpayers' confidential filings; use of such data is discouraged by OECD Transfer Pricing Guidelines Chapter III paragraph 3.36 unless appropriate disclosure to the taxpayer, subject to confidentiality safeguards, is provided.
Why it matters
It is a due process issue as much as a technical one: a taxpayer cannot properly rebut a proposed adjustment if it cannot see the comparables the adjustment is based on. It comes up often in jurisdictions with limited public company financial data, where tax authorities may hold proprietary datasets not available commercially.
How it works in practice
- 01The tax authority proposes an adjustment referencing internal comparables data not disclosed in the audit letter.
- 02The taxpayer requests disclosure of the comparables used, at least in redacted or anonymised form.
- 03The tax authority discloses fully, partially, or refuses, depending on domestic confidentiality rules.
- 04The taxpayer challenges the adjustment on procedural grounds if disclosure is refused, alongside any substantive rebuttal.
- 05Resolution typically proceeds through domestic appeal, competent authority (MAP), or litigation.
Worked example
Challenging an undisclosed adjustment
A tax authority in a market with limited public company data proposes a 15-percentage-point margin adjustment, stating only that it is based on 'data available to the tax administration.' The taxpayer formally requests the comparables list and financial detail. The authority discloses company names but not financials, citing confidentiality. The taxpayer argues, citing OECD Chapter III paragraph 3.36, that an adjustment cannot reasonably be defended against without the underlying figures, and escalates to the domestic appeals process while preparing a mutual agreement procedure request in parallel.
Common mistakes
- Accepting an adjustment based on undisclosed data without formally requesting disclosure first.
- Failing to raise the procedural objection early, before it is treated as waived.
- Not pursuing MAP or treaty relief where the adjustment leads to double taxation.
Audit red flags
- An audit adjustment citing comparables data with no company names, industry, or search methodology disclosed.
- A tax authority relying on data types (e.g., other taxpayers' confidential filings) not available in commercial databases.
- Repeated refusal to disclose comparables even in anonymised or redacted form.
Documentation & data
Documents to hold
- Formal written request for disclosure of the comparables used.
- Record of the tax authority's response and any partial disclosure provided.
- Own benchmarking study to counter the undisclosed position on substantive grounds regardless of disclosure outcome.
Data you need
- The taxpayer's own robust benchmarking study, prepared independently of the dispute.
- Correspondence trail documenting disclosure requests.
- Relevant treaty provisions and domestic procedural rules on evidence disclosure.
Who owns this internally: In-house tax controversy lead, supported by external counsel or advisors on procedural strategy.
Jurisdiction notes
- OECD member states
- Most OECD tax authorities avoid secret comparables in practice, given the Guidelines' explicit caution, though partial disclosure disputes still occur.
- Emerging markets
- Use of proprietary or undisclosed data has historically been more common in some jurisdictions with thinner public comparables pools.
Notes by role
In-house tax teams
Always request full disclosure in writing immediately upon receiving an adjustment referencing undisclosed data — this preserves the procedural argument.
Advisors & consultants
A strong, independently prepared benchmarking study is the best defence regardless of whether disclosure is obtained.
Frequently asked
- Does the OECD prohibit secret comparables outright?
- No, but paragraph 3.36 of Chapter III discourages reliance on data not disclosed to the taxpayer and encourages disclosure subject to confidentiality protections.
- What recourse exists if disclosure is refused?
- Domestic administrative appeal, litigation, or a mutual agreement procedure request if double taxation results, depending on the applicable treaty.
Sources & status
- Primary source
OECD Transfer Pricing Guidelines, Chapter III, paragraph 3.36
OECD, 2022
- Our interpretation
Practical disclosure and controversy response strategy
This glossary, 2026
Reference material only, not advice on a specific fact pattern. Reviewed 2026-06-30.
Careers
How this shows up in the job
Controversy specialists are often distinguished by how they handle exactly this kind of procedural fight, not just the technical economics.
Careers in transfer pricing