Question

1. Transfer pricing is one of the methods that MNCs use to move money around the world. This practice is still legal, but has been creating major problem in the world. Explain the problem and discuss how you would go about solving this problem.

Answer 1

Tranfer pricing is one of the method that MNC's use to move money around the world but there are too many problems behind using this method.transfer pricing happens whenever two companies that are part of the same multinational group trade with each other.

In transfer pricing sometimes transfer mispricing , transfer pricing manipulation or abusive transfer pricing problem is arises.transfer mispricing includes trade between unrelated parties.estimates vary as to how much tax revenue is lost by government due to transfer mispricing.transfer pricing is difficult to measure due to rigidity.there is lack of awareness on knowledge by tax payer on transfer pricing law.lack of availablity of comparable companies and transaction.there is difficulty in doing transfer pricing documentation requirements.