Using transfer prices may lead to _____.
A)increased local taxes
B)reduced ad valorem tariffs
C)exchange rate controls
D)decreased political risk

Question

Quizplus · Accepted Answer

Transfer prices can be used to reduce ad valorem tariffs in countries with higher tariffs. This is because companies can lower the reported value of imports to decrease the amount of tariffs paid. However, using transfer prices may also lead to tax avoidance and potential legal and ethical issues. The other options (increased local taxes, exchange rate controls, and decreased political risk) are not necessarily linked to the use of transfer prices.

Using Transfer Prices May Lead to _____