main purpose of the company is to increase its earnings and while doing so

Main purpose of the company is to increase its

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main purpose of the company is to increase its earnings and while doing so reduce the tax burden, Company still has to comply with Transfer pricing regulation so that the companies do not suffer the consequences of double taxation at a later stage. Transfer pricing cases present the details on how to apply transfer pricing internationally within one company. A few prominent cases continue to be a matter of contention between tax authorities and the companies involved. Many factors such as the OECD’s BEPS initiative have driven the complexity of transfer pricing. The most related scandals that relate to transfer pricing are tax-related scandals. In the current time, it involves some of the major corporations such as Amazon, Google or Starbucks (Barford and Holt 2013 ) where they are accused of practicing tax avoidance. However, This paper will specifically only discuss the misconduct of transfer pricing done by Vodafone, the 1
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world’s biggest telecommunication companies. It will summarize some key points and draw a general conclusion from Vodafone’s transfer pricing case. 2
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CHAPTER II TRANSFER PRICING 2.1 What is transfer pricing Transfer pricing is an intercompany transaction that happens between two companies under the same body. Transfer pricing can be attached as the value of goods and service transferred related parties. One subunit set the price that will be charged a product or service they supplied to another unit under the same organization. Globalization is one of the factors that support the company to operate in more than one territory that can be beneficial and how firms looking to minimize their overall tax liability. Products transferred between subunits of an organization called the intermediate products. Both of the segment can be cost center, profit center, and investment center. The purpose of transfer pricing is to increase the profit intro territories or areas that either have a favorable tax rate or more loopholes exist to be exploited . Transfer pricing is designed to accomplish different objectives in the company. It should give every business unit a piece of relevant information for an optimum trade-off between company cost and revenue. The decision of each business unit has to improve the business unit itself and that followed by the improvement of company profit as a whole, goal congruence. In addition, transfer pricing should help measure the economic performance of the individual business units and motivate management effort. Transfer pricing closely related to company tax bills. The company can use transfer pricing to transfer profits and costs to other divisions or business units internally to reduce their tax burden. Thus, tax authorities have strict regulations regarding transfer 3
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pricing to avoid companies do tax evasion or avoidance. There are problems associated with transfer pricing such as additional time, costs and manpower needed for executing the transfer prices and designing the accounting system to match the requirements of transfer pricing rules and arm’s length prices might cause dysfunctional behavior among the managers of organizational units. There are many issues related to transfer pricing in
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  • Spring '19
  • Ahmad Mutaaqin
  • The Road, Vodafone Group Plc, Vodafone India Transfer Pricing Case

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