Sikka & Willmott (2010) suggested that \"transfer pricing practices are responsi

Question

Sikka & Willmott (2010) suggested that "transfer pricing practices are responsive to opportunities for determining values in ways that are consequential for enhancing private gains, and thereby contributing to relative social impoverishment, by avoiding the payment of public taxes" Required: a) Referring to Sikka & Willmott (2010), discuss the ‘dark side' of transfer pricing. b) Referring to the notion of inscription (Robson 1992), discuss whether transfer pricing can be viewed as (8 marks) an inscription (7 marks)

Explanation / Answer

a) Transfer price is a price at which the divisions of a company transact with each other. For Eg:- A japanese company toyota has its plant in USA, now suppose the car company in US wanted to purchase a ABS system locally, now suppose the US government is charging more tax on the company profits, so in order to reduce the tax, company in US started purchasing the ABS system from its parent company in Japan and that to in much higher prices, thus reducing the profit margins in the datasheets. Thus transfer pricing emerged as a tax evasion technique hurting various economies worldwide.

b) Inscription means anything in the written form, transfer pricing is basically done through wrong accounting or wrong inscriptions in the data books or the work books, thus showing the lesser profit margins, thus paying lesser amount of tax to the concerned government. so yes it can be viewed as a inscription.

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