Discussion: Offshoring profits to avoid corporate taxes

By Sue McMurray, Carson College of Business

PULLMAN, Wash.— Tax-related transfer pricing and multinational profit shifting will be discussed by four experts 4:30-6 p.m. Thursday, March 31, in CUE 203 at Washington State University.

The topic is perhaps best described by this excerpt from Wikipedia:

Transfer pricing is the setting of the price for goods and services sold between related entities. For example, if a subsidiary company sells goods to a parent company, the cost of those goods paid by the parent to the subsidiary is the transfer price. Transfer pricing can be used as a profit allocation method to attribute a multinational corporation’s net profit (or loss) before tax to countries where it does business. In principle, a transfer price should match either what the seller would charge an independent, arm’s length customer, or what the buyer would pay an independent, arm’s length supplier. While unrealistic transfer prices do not affect the overall enterprise directly, they become a concern for government taxing authorities when transfer pricing is used to lower profits in a division of an enterprise located in a country that levies high income taxes and raise profits in a country that is a tax haven that levies no (or low) income taxes. Transfer pricing is a major tool for corporate tax avoidance also referred to as base erosion and profit shifting (BEPS).

The speakers and areas of discussion:

• Aligning transfer pricing outcomes with value creation, by Chris Faiferlick, Ernst & Young LLP principal.

• Disclosure, documentation and country-by-country reporting, by Leslie Robinson, associate professor at Dartmouth University’s Tuck School of Business.

• Neutralizing hybrid mismatch arrangements and designing effective controlled foreign company rules, by Reuven S. Avi-Yonah, Irwin I. Cohn professor of law and director of the international tax LLM program at the University of Michigan.

• Measuring and monitoring the impact of base erosion and profit shifting, by Kimberly Clausing, Thormund A. Miller and Walter Mintz professor of economics at Reed College.

The presentation is hosted by the WSU Howard D. and B. Phyllis Hoops Institute of Taxation Research and Policy (https://business.wsu.edu/research-faculty/institutes/hoops-institute/), the Foley Institute for Public Policy and Public Service (https://foley.wsu.edu/), and the Carson College of Business (https://business.wsu.edu/).

Contacts:

Jeff Gramlich, WSU Hoops Taxation Research and Policy Institute, 509-335-5358, jeff.gramlich@wsu.edu

Sue McMurray, WSU Carson College of Business communications, 509-335-7578, sue.mcmurray@wsu.edu