Which of the following statements is/are true?
When a multinational company transfers goods or services between business units located in different countries:
i. the tax rates of the different countries will have no effect on overall company profits.
ii. the result is a moving of profits from one country to another.
iii. the company will consider the tax rates of the different countries when determining the transfer price.
A) i
B) ii
C) i and ii
D) ii and iii

Question

Quizplus · Accepted Answer

Statement ii is true as multinational companies may transfer goods or services between business units located in different countries in order to shift profits from a high-tax country to a low-tax country. Statement iii is also true as companies will consider the tax rates in different countries when determining the transfer price in order to minimize their overall tax burden. Statement i is false as the tax rates of the different countries will have an effect on the overall company profits.

Which of the Following Statements Is/are True