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Multinational corp: Transfer pricing ethical? Good business?

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Multinational corporations can use transfer pricing to adjust costs in transactions involving the transactions between divisions in different countries. There may be a tax consequence. Is this ethical ? Is this good business?

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Solution Preview

Transfer pricing permits a firm, especially those operating in multiple taxing authorities, to "push" profits into the low tax rate locations and costs into the high tax rate locations. This minimizes taxes. It is considered a practical way to minimize expenses and is not unethical as long as it is transparent and not deceitful. If taxing authorities prohibit it or company policies prohibit it, then it is unethical (and potentially illegal).

Now for the stickier question: Is this good business? Transfer pricing must be planned carefully because moving profits around ...

Solution Summary

Your discussion is 376 words and names three problems with transfer taxes that address both the ethical and business impact.

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