Suppose a large Australian multinational has two subsidiaries – one in Australia and one in China. The Australian subsidiary internally purchases intermediate goods from the Chinese subsidiary and sells the final goods in the Australian market. As of now, both subsidiaries are making substantial profits, and the marginal tax rates are 20% in China and 35% in Australia. Which of the following statements is true?单项选择题

题目图片
A

a. The multinational as a conglomerate would gain from increasing the internal price of intermediate goods sold by its Chinese subsidiary.

B

b. The multinational as a conglomerate would gain from decreasing the internal price of intermediate goods sold by its Chinese subsidiary.

C

c. There is no advantage to changing the internal price of intermediate goods since the price of the final goods is the same.

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A transfer pricing structure that considers the opportunity costs of selling to internal rather than external customers uses ________.

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