Problem
Multinatl Inc. has a manufacturing facility in Zolondia which incurs costs of $1,000,000 for goods it sells to its retail outlet in Aborla. The retailer resells these goods to consumers for $2,000,000. Operating expenses in Zolondia and Aborla are $100,000 and $150,000, respectively. Zolondia and Aborla levy a corporate income tax of 30 percent on taxable income in their jurisdictions. 31. If Multinatl Inc. raises its transfer price from $1,300,000 to $1,600,000 for these goods going from Zolondia to Aborla, what effect would this have on total consolidated taxes? 32. If the tax rate were different in each country: Zolondia tax rate = 20 percent and Aborla tax rate = 40 percent, what would be the tax effects of the transfer pricing action?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.