Transfer Pricing

Question 1

What is transfer pricing an example of

Answer 1

Disadvantage of globalisation

Question 2

What + why (3)

Answer 2

Transactions between companies in the same multinational group
Allocate their profits to different countries with different tax rates
Offshore their profits via intermediatary businesses = profits fall + cost rise so tax pay falls

Question 3

PROBLEMS FACING POLICYMAKERS WHEN APPLYING POLICIES (3)

Answer 3

Inaccurate info
Unintended consequences
Inability to control external shocks

Question 4

Inaccurate info (3)

Answer 4

At 0.1% economic growth so used fiscal policy subsidy
BUT businesses at full capacity = short run cannot increase
BUT in long run CAN

Question 5

Unintended consequences (2)

Answer 5

Consumers don’t react how expected
Should be rational but sometimes aren’t

Question 6

Unintended consequences example (3)

Answer 6

Fat tax
Sugar tax = reduced consumption and obesity
Lucozade = less glucose and didn’t tell C = diabetics had health issues

Question 7

Inability to control external shocks (2)

Answer 7

Out of govs control
Policies don’t have intended effect

Question 8

Example external shocks (2+)

Answer 8

War in Ukraine = cost push inflation on commodity
Gov increased interest rates from 0.25 to 5% but demand inelastic = WRONG POLICY