Multinational Firms Often Face Conflicting Pressures When Developing Transfer Pricing

question 141

Multiple Choice

Multinational firms often face conflicting pressures when developing transfer pricing policies. Tax avoidance results when:

• A) inflated transfer prices are used to reduce the profits of divisions in high tax-rate countries.
• B) inflated transfer prices are used to reduce the profits of divisions in low tax-rate countries.
• C) cost-based transfer prices are used instead of market transfer prices in high tax-rate countries.
• D) cost-based transfer prices are used instead of negotiated market transfer prices in low tax-rate countries.

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Definitions:

Democratic Leadership

A leadership style in which decision-making is shared among the group, often characterized by participative or consultative processes.

Maintenance Role

A function within a group that focuses on preserving social cohesion and ensuring the smooth operation of the group.

Leader-Member Relations

The dynamics and quality of the interaction between a leader and their team members, influencing team function and morale.

Situational Contingency

The concept that the effectiveness of leadership or decision-making strategies depends on situational factors or contexts.