Suppose a U.S.-based MNC makes computers with parts from its subsidiary in a low-tax East Asian country.It can reduce its reported U.S.income-and increase its subsidiary's profits-by

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Quizplus · Accepted Answer

By overpaying for the computer components from its subsidiary in a low-tax country, the U.S.-based MNC can shift profits from the high-tax U.S. jurisdiction to the lower-tax jurisdiction, thereby reducing its overall tax liability. This is a common tax strategy known as transfer pricing.