A US-Based Multinational Has Two Subsidiaries, One in Lithuania Where the the Tax

question 46

Multiple Choice

A U.S.-based multinational has two subsidiaries, one in Lithuania where the tax rate is 15%, and one in Ireland where the tax rate is 2%. The tax rate in the U.S. is 35%. If the Lithuanian-based subsidiary is transferring a good to the Irish subsidiary and the goal is to avoid taxes, it will

• A)sell it to the U.S. parent at a transfer price equal to marginal cost, which will then sell it to the Irish subsidiary at monopoly level pricing.
• B)set the transfer price to the Irish subsidiary at the monopoly level.
• C)set the transfer price to the Irish subsidiary at marginal cost.
• D)Unable to determine with the information given.