Define transfer pricing and explain why and how Transnational Corporations use it in their intra-firm trade.
- Define transfer pricing and explain why and how Transnational Corporations use it in their intra-firm trade.
Homework Answers
Transfer pricing refers to purchase of goods and services by one department of a parent organization from another at inflated prices. In order to avoid corporate taxes and report losses or meagre profit in the balance sheet.
Transfer price mechanism aids in intra-firm trade for instance, alphabet corporation taking software services from Google at thrice the market prices. This kind of trade helps to overcome rigid market and labor laws.
MNC use transfer price mechanism to enhance their profitability and undertake tax evasion. MNC extensively use transfer pricing for licensing agreement and subcontracting.
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Define transfer pricing and explain why and how Transnational
Corporations use it in their intra-firm trade.
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