Identify and explain the principal techniques of transfer pricing, and Essay

Identify and explain the principal techniques of transfer pricing, and comment on likely developments in transfer pricing in an era of globalization - Essay ExampleIn contrast, a market price is not delineated by an item-by-item but prevails to any participant indoors a market set-up involving exchange of goods and services between unrelated persons. We note that the market price cannot be tampered with and all person strives to maximize on own gains. Prices at heart the conventional market scene argon determined by forces of market while the transfer prices are determined and set by an individual and thus are not negotiated freely or openly. This implies that transfer prices would often deviate from the conventional market prices within the same or alike market circumstances. It is worth to note that subsidiaries to one enterprise operating within one country face similar operating(a) environment and hence the transfer prices poses similar problems of tax avoidance while compar ed to subsidiaries operating within different countries. With multinationals running various subsidiaries in different countries, which view as different regulatory frameworks, taxation problems through transfer prices are very pronounced. The most prevalent problem with price transfers with multinationals is the tendency of subsidiaries stating inaccurate prices in rank to lower profit margins to avoid high taxation. Beside, multinationals manipulate transfer prices through the internal payment networks with the goods they share between one to another. Therefore, the channels adopted within duty transactions by multinational subsidiaries, some price distortions are possible which may not be possible within the uncontrolled trading transactions by unrelated/unaffiliated trading companies.There are a number of principles techniques, which are applied in transfer pricing and which determine the overall outcome in price transfers. The methods of transfer pricing involve ways of calc ulation of margins of profits of telephone line transactions within an entire business enterprise. However, it is worth