How multinational firms can profit from sophisticated transfer pricing strategies

Tax Dispute Settlement Analysis On The Implementation Of Transfer Pricing in Transactions Between Affiliated Companies Using Advance Pricing Agreement (APA) Or Mutual Agreement Procedure (MAP) In Indonesia

“…In determining the pricing methodology there are several variables that need to be considered, namely corporate strategic objectives, cash flow management, performance measurement, and organizational culture. Externally, income tax factors, economic conditions, customs duties, capital restrictions and foreign exchange differences are also factors that companies need to consider in determining transfer pricing (Martinson, Englebrecht & Mitchell, 1999).…”

International tax planning techniques: a review of the literature

“…The tax planning strategy through revenue shifting by geographic areas is also associated with transfer pricing. The transfer price is defined as "the method of pricing raw materials, products or services that are transferred between the parent company and its subsidiaries or between the different subsidiaries" (Martinson et al, 1999). Bruce et al (2007) International tax planning techniques argue that transfer pricing is a common type of tax planning.…”

“…Transfers of revenues by geographical area Gordon and Slemrod (2000) An increase in corporate tax rates relative to personal rates results in an increase in reported personal income and a drop in reported corporate income Mintz and Smart (2004) Taxable profit for multijurisdictional firms that are able to transfer income between affiliates is more mobile than for companies that do not Beer et al (2019) The assessment of intracompany business within a multinational company affects the global allocation of the tax base between source and residence countries Dharmapala (2014) Effective tax rates on the foreign earnings of Google and Apple were reported at 3% and 1%, as a result of profit transfers Martinson et al (1999) The method of pricing raw materials, products or services that are transferred between the parent company and its subsidiaries or between the different subsidiaries is considered as one of tax planning techniques Bruce et al (2007) Transfer pricing is a common type of tax planning Rego (2003) Tax rate of multinationals is lower than that of their counterparts Scholes and Wolfson (1992) The transfer of income is linked to a tax planning strategy that converts a taxpayer's income from one form to another Scholes et al (2005) Approaches of tax planning include the transfer of income by geographical area, the shift of income from one type to another and the transfer of income from one period to another Redevelopment of the company Huizinga et al (2009) Mergers, acquisitions, divisions and international firms may be involved in mergers and multinational reorganizations Stonham (1997) Firms benefited from tax planning following the adoption of a spin-off strategy in 1996 Barrios et al (2009) The tax regime of parent companies and subsidiaries plays a significant role in the choice of location of subsidiaries, especially as countries will be liberalized Desai and Hines (2002) Changes in the associations between parent companies and subsidiaries are motivated by the desire to escape the taxation of US companies on their foreign income Tax haven Mara (2015) Low taxation is not enough for a country to be a tax haven. Only countries that have an important part of services relative...…”

The Valuation of Technology-Based Intellectual Property In Offshoring Decisions

“…Companies are not the only organizations concerned with IP valuation; governments in many countries are losing billions of dollars of taxes due to inadequate transfer pricing estimates in offshore parent-subsidiary relationships [Martinson et al 1999].…”

“…If the host receiving the IP is a controlled foreign corporation of the sponsor or a controlled foreign holding company, then the transfer of IP is not transparent on the sponsor's books, since the books need only show consolidated amounts [GOA 1995]. The extraction of profits from sponsors and sellers via royalties using complex IP hosting structures is common [Martinson et al 1999]. The amounts involved in these arrangements are massive [Economist 2000].…”