Bloomberg is reporting Google saved $3.1 billion via transfer pricing over the past three years. Transfer pricing is a legal yet controversial tax strategy whereby a company allocates “income to tax havens while attributing expenses to higher-tax countries.”
To be fair, Google is merely one of “countless” companies which use transfer pricing. Even Facebook is planning to get in on the fun ASAP.
However, while the US loses $60 billion in tax revenues annually to transfer pricing, the question remains:
Is “transfer pricing” simply a nice legal term for a form that operates a lot like money laundering in function?
Yes, transfer pricing is redefining money laundering into a legal loophole
Besides the fact that multinational corporations have world-class lawyers and lobbyists, no other reason exists for a business to report income in lower-tax countries and expenses in higher-tax countries. On an objective scientific level, moneys earned and expenses accrued within a country should be reported there. Everything else is a game which enriches the company at the country’s expense.
The same way lobbying is legal bribery of a public official, transfer pricing is legal money laundering by shifting accounting items into subsidiaries that avoid appropriate taxation.
No, transfer pricing is a legitimate way of accounting
The law is the law. If the law allows transfer pricing, there’s nothing wrong with it. A corporation is mandated with maximizing profits, so governments need to change the law if they don’t like transfer pricing.
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