4.5 - TNC's

Question 1

What is an MNC/TNC?

Answer 1

Firm with one designated HQ + many global branches
Owns/controls production in many nations

Question 2

What is transfer pricing?

Answer 2

Profit shifting
TNC moves profits from subsidiary in high tax nation to tax haven

Question 3

What are the benefits of TNCs to host nations?

Answer 3

Employment/training
Spending generates GDP
Domestic competition incentive
Consumer + business choice
Tax revenue

Question 4

What are the drawbacks of TNCs for host nations?

Answer 4

Domestic industry falters
Ethical + social responsibilities
Cultural diffusion
Profit leakage
Tax avoidance

Question 5

How can TNCs improve the balance of payments?

Answer 5

Increasing export quality + demand

Question 6

Why may the govt struggle to control TNC activity?

Answer 6

Threat of market withdrawal
Potential losses incurred
Competition to attract TNCs

Question 7

What is the UK’s proposed counter to transfer pricing?

Answer 7

Diverted Profits Tax
Companies convicted of aggressive tax planning subject to 25% charge