Transfer Pricing In Multinational Corporations

Transfer pricing is one of the key parts in internal trade processing of multinational corporations (MNC). Models of transfer pricing are extended by completing the comparative static-analysis and quantitative analysis. Traditionally the MNC uses the transfer price as a profit-shifting mechanism to minimize its global tax liability to maximize its global after-tax profit, but as the extended scales of international trade, international investment and international production at unprecedented speed worldwide, different organizational and environmental variables that affect the choice of transfer pricing mechanism, now transfer pricing is being more and more important to MNC's enterprise strategies. The purpose of this dissertation is to provide theoretical models that can be used to determine the right transfer price of internal transaction by analyzing the variables both inside and outside of the MNC, and gives the guideline to Chinese MNCS to improve their operating efficiency. This dissertation also uses cost-effect analysis to determine the critical point of transfer pricing decision making.