Transfer pricing

Question 1

What is transfer pricing?

Answer 1

An accounting technique that allows one subsidiary to charge a fee to another part of the company.
Used to minimize taxes payed.

Question 2

Transfer Pricing: What did CoCa Cola do between 2007 and 2009?

Answer 2

Transfer much of its intellectual property (brand value) to subsidiaries in countries with low taxes

Question 3

Where is Amazon’s EU HQ located where it pays effectively no tax?

Answer 3

Luxembourg, Only $245 million was charged to the EU division for intangible assets eg software policy lists, regulators thought this was too low, still ongoing in EU courts

Question 4

How can game theory be applied to transfer pricing?

Answer 4

Encourages a race to the bottom of corporation tax rates.

Question 5

What percentage of capital flight from African nations is due to transfer pricing?

Answer 5

60%

Question 6

What can be done to intervene with failure caused by transfer pricing?

Answer 6

Require a joint venture or local partial ownership (common in China)
Agreement on international minimum corporation tax rate
Agreements on tax enforcement where goods are produced rather than where the countries headquarters are