The government of Indonesia is concerned that MNCs are adjusting transfer prices to their Indonesian subsidiaries in order to decrease tariff payments in Indonesia.The Indonesian government should
A)review increases in transfer prices.
B)review decreases in transfer prices.
C)require spot pricing on all transfer prices.
D)require forward pricing of all transfer prices.

Question

Quizplus · Accepted Answer

The Indonesian government should review decreases in transfer prices because lowering transfer prices can be a strategy used by MNCs to reduce the taxable base in Indonesia, thereby decreasing the amount of tariffs and taxes paid to the Indonesian government. By reviewing decreases in transfer prices, the government can ensure that these prices are not artificially lowered to evade taxes and tariffs.

The Government of Indonesia Is Concerned That MNCs Are Adjusting