Hello Hope you are doing well. I could not understand the sentence in the context on Pg16 of Ch6 here: 'profit shifting through transfer mis-pricing, ie by setting prices for intra-group transactions which are inconsistent with market rates or by levying high charges for the use of intellectual property such as trademarks.' Please help me to understand the same. Thanks in advance Yogesh
Hi Yogesh So one example might be where a company has several divisions, each in a different country and each performing a different role. Eg perhaps one division is responsible for extracting raw material, another for manufacturing and another for marketing and distributing the finished product. The transfer prices are the prices charged by one division to another for their product or service. The parent company can arrange the transfer prices so that the division based in a low-tax country makes substantial profit (which is then taxed at a very low rate) and the divisions located in countries with high tax rates never make a profit. By doing so, the company maximises post-tax profits for shareholders
