Based on what I remember from my past classes, transfer pricing is a
practice that companies use to reduce their tax liabilities by
transferring their products and services from the United States to
other countries. Despite having read this week's article before, I find
the concept to be just as perplexing as it was a year or two ago. In my
opinion, it is unfair for businesses to relocate everything to another
country solely to avoid paying taxes.
To ensure accurate reporting and prevent tax evasion, the IRS has the
authority to adjust the income, deductions, credits, or allowances of
frequently managed taxpayers under Section 482 of the Code. This
section requires that any prices charged between affiliates in an
intercompany transaction involving the transfer of goods, services, or
intangibles should be comparable to those that would have been
achieved if uncontrolled taxpayers had entered the same transaction
under the same circumstances (Transfer pricing, n.d.).
Reference
Transfer pricing. Internal Revenue Service. (n.d.).
https://www.irs.gov/businesses/international-businesses/transfer-
pricing
