Other
EIBR Guest lecture notes Allison Christians
- Course
- Institution
Notes to the Guest lecture Allison Christians 2015/2016
[Show more]
Seller
Follow
douwe7
Reviews received
Content preview
EIBR GastcollegePart 1:
At arms length-beginsel (AL)
AL doesn’t work, but we don’t know what to change.
What is Transfer Pricing (TP) for?
-Why do you want to set prices between two enterprises? To shift profits, so you have to pay less
tax? No.
Why TP?
-TP is gonna tell us what one enterprise pays to another. What do enterprises charge to one another.
-If you have established this, then you get strategic: you want to get your costs in a country with high
taks and your income with low tax.
-As a enterprise you set the price advantageous for yourself to get the above.
-TP has a answer for that: At arm’s length.
At arm’s length:
-At arm’s length: what A pays to B if there were no relationship between them.
-you have a 25% margin on both sides of the right price.
Problem with AL:
-If company A sets up B and you only have to establish the price. Then A is gonna try to put B in low
tax countries. That is the problem.
TP exsists outside tax.
What do we want to accomplish with AL:
-Non-economic way to allocate income.
Problem:
-Global supply chain is a problem:
-In a world without integrated firms there wouldn’t be a problem, because everybody wants to get as
much profit as possible.
-But with integrated firms like Apple, they outsource every activitiy to different firms. So sales to that
firm, logistics to that firm etc. However Apple and all these firms are all together. Very unclear where
Apple gets what. But Apple has to draw out each year every transaction to establish a price.
Problem is THERE IS NO COMPARABLE. (no free market). So Apple makes up a story for every
transaction and everybody is happy. (without this an iphone would cost 9000 dollar).
Formulary aportionment:
-I don’t care about your expenses and income. We start with what is your global profit as a whole
multinational? (so not per transaction). After that the profit is divided amongst other countries.
Three elements Formulary Apportionment:
-Sales
-Assets
-Labour
Take profits from the global multinational. After that divide it amongst the enterprises.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller douwe7. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.34. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
64257 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 15 years now