Question

Assume that a multinational corporation (MNC) is (i) shipping product from Brazil (Country B) to Australia (Country A), and (ii) the tax rate in Country B < tax rate in country A, in answering the following questions:

1. If MNC managers wish to minimize (taxes + tariffs), how should they go about setting the transfer price. [Use a graph to motivate your answer]

2. If MNC managers wish to minimize (taxes), how should they go about setting the transfer price [Provide thumb-rules as part of your answer]

3. If MNC managers wish to minimize (tariffs), how should they go about setting the transfer price [Indicate which country imposes the tariffs]

Answer 1

Hi

The answer of the following question is given below as follows :

In the given case, there is a transfer within the country and some tax benefits are: -

In the given case the product is shipping from Brazil (country B) to Australia (country A) and the tax rate in country B <a

Ans.A). If MNC managers who do the least (tax + fee), they should determine the transfer price in such a way that the cost of goods is higher in high tax lands and the cost of goods is lower in low tax lands which The implication leads to taxes.

Ans.B) If MNCs manage the method of least (tax), then they should go about setting transfer value as high in high tax land and low in low tax land some of the important thing are discussed below as follows :

a. Transfer price in Australia is high to charge expenses and avoid high tax rate

B. Charge of all the profits of the product in Brazil under lower taxes.

C. If the MNC manager switches to a minimum (tariff), they should know the setting of the transfer price, possibly near the cost of the product.

So as To reduce the tariff value, managers reduce the number of transfer prices and make all goods taxable in their country of origin regardless of tax rates.

I hope I have served the purpose well.

Thanks.