Th4.5: Regulation of Transfer Pricing Flashcards
1
Q
Transfer pricing is one way for firms to engage in…
A
tax avoidance
2
Q
This can occur if a firm…
A
produces a good in one country and then transfers it to another to make it into another good which it then sells
3
Q
If taxes are higher in the first country than the second…
A
they can set a low price on the product made in the first country
4
Q
What is the overall aim?
A
to increase their profit made in the low tax country and decrease it in the high tax country, overall reducing their tax bill
5
Q
What is the ‘arm’s length’ principle?
A
aiming for the price to be the same as if the two parties were independent of each other
