Historically transfer pricing laws are ways a tax authority, like the U.S Internal Revenue Service, can reallocate income, expenses, deduction, et. al., when the tax authority deemed a taxpayer was not charging a ‘fair’ price to the good, service, et. al., produced/performed in its country.
1. Is transfer pricing a ‘fair’ way method for determining the appropriate return to a business activity? What alternative way would you recommend to the tax authority?
2. Compare the alternative method to the current transfer pricing standards.
Can Transfer Pricing be used as a pro-active tool by governments to achieve specific economic results? If so, how could a government enforce a TP regime which is used to achieve an economic result and still be fair to the businesses in the country?