Transfer Pricing
When a multinational company sets the price for sales between its own subsidiaries in different countries — often to move profit to low-tax countries.
Formula
Transfer Price = Artificially set internal price between subsidiaries
Real World
Google routes profits through its Irish subsidiary, which historically paid a lower corporation tax rate, allowing the company to reduce its overall global tax bill significantly.
Exam Focus
Clarify that transfer pricing is legal but ethically contested; distinguish it from tax evasion when 'discuss ethics' questions arise.
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