The Research on Transfer Pricing: A Method of Tax Avoidance and Profit Maximization for Multinationals— Taking WR Corporation for Instance

Abstract

Transfer price is the internal price set by multinational enterprises basing on financial strategies. By means of transfer pricing, multinationals can achieve various goals such as avoiding tax, exchange-rate risk, political risk and governments’ regulation on foreign exchange. It is also beneficial for them to reduce cost, allocate funds, maximize profits and manage their subsidiaries. Loopholes in the laws enable WR Corporation, a famous multinational company, to employ transfer price to avoid tax. It demonstrates that multinational enterprises can also employ transfer price to legally and reasonably reduce transaction cost, optimize resource allocation, and therefore avoid tax.