Page 191 - International Marketing

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BRILLIANT'S Overseas Market 193

Tax regulations and transfer prices
Since, the global corporation conducts business in a world
characterized by different corporate tax rates, there is an incentive to
maximize system income in countries with the lowest tax rates and to
minimize income in high tax countries. Governments naturally are well
aware of this. In recent years, many goverments have tried to maximize
national tax revenues by examining company returns and mandating
reallocation of income and expenses.
The greatest challenge before international marketers is international
pricing area in light of current tax laws. It is important to note that treasury
regulations should be examined carefully though they are not accepted
by the courts.
Transfer Pricing Practices
1. Companies tend to look at transfer pricing not just as a mere
accounting exercise, but also as an important tool in policy
formulation towards achievement of corporate objectives.
2. Transfer pricing acts as a major source of political conflict within
the organization and this takes place irrespective of the method
used for this purpose. Different methods may, however, increase
or decrease the possibility of conflict.
3. Companies tend to use a variety of transfer pricing methods.
However, the dominant among them are the market prices or the
methods based on modifications of the market prices.
4. Even though many companies use transfer prices as a policy
variable, it is not the major or principal policy variable.
5. International companies use conscious manipulation of transfer
prices as an instrument of maximizing achievement of corporate
goals. An explicit example is the transfer of profits from subsidiaries
to parent companies or other companies in the group through
transfer pricing policies relation to supply of capital equipment or
inputs by multinational companies. 
DUMPING

Q.30. Why “Dumping” pricing strategy is discarded by domestic
marketers? [MBA-2011]
OR
Write a short note on: ‘Dumping as a pricing strategy and
recent Indian Experiences’. [MBA(FT) 2007, 2005, 2004]
OR