Multinational companies use transfer prices to minimize world-wide income taxes and import duties.

Question

Quizplus · Accepted Answer

Multinational companies use transfer prices to shift profits from high tax countries to low tax countries, thus minimizing their global income taxes. They also use transfer prices to artificially inflate or deflate the price of goods being transferred between subsidiaries in different countries to minimize import duties. This allows them to reduce costs and increase profits. However, the use of transfer prices for tax avoidance purposes has come under scrutiny from tax authorities in many countries.

Multinational Companies Use Transfer Prices to Minimize World-Wide Income Taxes