The International Issues Of Transfer Pricing Practice On Multinational Corporate

The primary purpose of this report is to provide current and relevant information on corporate transfer pricing practices. The report is based on research, performed by Roger Y. W. Tang, which has two major components: a questionnaire survey of selected Fortune 1000 companies and case research that involved five U.S. multinational companies. This report is to review major findings from the questionnaire survey and five corporate cases on corporate strategies, transfer pricing, and performance measurement practices. Comparisons among the five corporate cases are also provided.The research of Roger Y. W. Tang revealed the findings as follow:It can be concluded that tax regulations and profits are the two overriding considerations of international transfer pricing.The pricing methods frequently used for domestic transfers included market price, negotiated price, full production cost, and actual or standard full production cost plus a markup. For international transfers, the most frequently used method was full product cost plus a markup, market price, market price less selling expenses, and negotiated prices.This report supports the contingency-theory approach that companies choose a method based on what is perceived as optimal in their particular situation.The other purpose of this report is to provide an anonymous case study in order to give a commercial sample in considering whether the results of (a sample MNC company) OA's international related party transactions in the review period has conformed to the "ami's length" principle contained in Australia's transfer pricing law.The following can be concluded that:(1) Methodology decision about the suitability of a particular methodology should be made on the basis of the facts existing at the time.(2) The 4 steps for testing the most appropriate transfer pricing methodology are proposed.(3) APA (Advance Pricing Agreement) is playing a more important role in improving future compliance by providing certainty to both tax payer and tax authority.Hope this report can be useful to corporate executives, transfer pricing system administrators, students and teachers in accounting, finance and international business.