The OECD and the U.S. Internal Revenue Service have issued guidelines on transfer pricing because it has such critical tax implications.

Question

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Transfer pricing affects how profits or losses are attributed to different subsidiaries within a multinational corporation, which can have a significant impact on the taxes paid in each country. The OECD and the IRS have issued guidelines to ensure that transfer pricing is conducted in a fair and transparent manner to prevent tax avoidance or evasion.