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Transfer Pricing by Multinational (Global) Enterprises


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Transfer Pricing by Multinational (Global) Enterprises


One of the most controversial and often least understood of a multinational's operations is that of Transfer Pricing.

When one part of a multinational organisation in one country transfers (that is, sells) goods, services or know-how to another part in another country, the price charged for these goods or services is called 'transfer price'. This may be a purely arbitrary figure, meaning by this that it may be unrelated to costs incurred, may be unrelated to operations carried out or to added value. And the transfer price can be set at a level which reduces or even cancels out the total tax which has to be paid by the multinational.

In other words it is possible for a multinational company to minimise its liability for corporation tax by transfer pricing.

Say a multinational has increased its profits in such ways. As the government's expenses have not changed it must make up this shortfall elsewhere. From its other tax payers, say from its citizens. So its citizens pay more tax, the government can now spend the same amount as before, the multinational's profits have increased.

In other words, the multinational's increased profits arise from money which is in effect collected by the government by taxation from its taxpayers.

Studies published in the USA, for example, tell us much about the extent to which multinationals can avoid paying tax on their profits. These present a disturbing picture.


Sources

See report
Transfer Pricing and Taxation
from which this theme's information was extracted.


Short Description

Title   Description
     
Transfer Pricing and Taxation   One of the most controversial operations of multinationals, transfer pricing, is clearly described and defined. An easily-followed illustration shows how transfer pricing can be used by multinationals to maximise their profits by tax avoidance and by obtaining tax rebates. Also discussed is the effect of transfer pricing on the tax burden carried by other tax payers.


Manfred Davidmann

Manfred Davidmann is an internationally well-known and respected scientist and author of a number of books and reports which have had and are having considerable impact. His work usually breaks new ground and opens up new understanding and is written in meaningful and easily understood language. Outstanding is that his work is generally accepted as factual, objective and unbiased.


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