During the current year Ruby Company's foreign division A incurred production costs of RM4 million for units that are transferred to its other foreign division, B. Costs in Division B, outside of the costs of production of the final product are RM8 million. These are third-party costs. Sales revenue for the final product for Division B is RM30 million. Other companies in the same country import a similar type of part as Division B at a cost of RM7 million. Ruby has set its transfer price at RM14 million, justifying this price because of the special controls it has on the operations in Division A as well as its special manufacturing method. The tax rate in the country where Division A is located is 40%
while the tax rate for Division B's country is 70%.
Required:
a. What would Ruby's total tax liability for both divisions be if it used the RM7 million transfer price?