Trials and Tribulations With Transfer Pricing

The legality of transfer pricing certainly has a grey line. Sure, there needs to be the benefit of companies trading with other foreign companies. Companies need to benefit from the abundance of goods and resources from foreign land. However, when prices are set as to avoid the larger taxes and gain maximum profit, litigation may be mandatory.

Transfer mispricing is defined as trade to related parties at distorted prices to minimize the overall tax bill. Unrelated parties who participate in a trade that generally follows a good transfer pricing through the use of the “Arm’s Length Principle” where a common market price for the item being traded is set. However when a company has related subsidiaries, they may participate in this price manipulation. Let us say there are three related companies: X, Y, and Z. Company X has an abundance of minerals that they will trade to Company Y at a low price. Company Y is located in a tax haven, or a place where the tax rates tend to be low. Company Y then trades to company Z at an artificially high price. Company Z has low profits, however company Y has very high profits. Along with that, they are in a low tax area, therefore their high profits achieve maximum profit as they avoid the burden of heavy taxes (Tax Justice Network). As a result, taxes become skewed.

As an actual example, China faced issues regarding transfer price manipulation. In the article, “How To Train A Toothless Dragon: Finding Room For Improvement In China’s Transfer Pricing Regulations”, fifty-five percent of Chinese companies reported a net loss in 2005. Along with this number, a staggering forty percent of transnational companies held in China were forced to make tax adjustments. The Chinese Government believed this was actually due to price manipulation and sought to eradicate that practice in their country. In order to accomplish this goal of avoiding the mispricing of international trade, the Chinese government enacted the sixth chapter of the Enterprise Income Tax Law of 2008. This increases penalties against companies whose intention is to lower their taxes, requires companies to fill out detailed disclosures of their international trade, and demands an advance pricing agreement where the taxpaying company and the Chinese tax authority agree ahead of time on the price of taxes.

Transfer mispricing is so hard to track because the trades switch from multiple companies in multiple countries that all have different tax rates. A single, uniform tax rate might be ideal in theory in order to ease the tracking and the tax pricing of these trades, but it of course would not work in practice. Some companies need a lower tax rate in order to promote business in their area. Countries, like China in from 1996 to 2000, have to put a lot of effort in order to recover billions of dollars lost through transfer pricing. China during this time period recovered almost 10 billion yuan in this time period.

Transfer pricing also has a burden separate of mispricing. Even if companies comply fully with the Arm’s Length Principle, they are subject to disputes that cause adjustments to their taxable income as well as potential penalties because the tax authorities may not agree with the corporations’ economic method or value chain (Journal of Accountancy). Statistically, a growing number of participants in a survey conducted by Earnest and Young said that their companies faced penalties due to transfer pricing. They note that transfer pricing is among the top of all tax concerns because the company is unsure if they are properly abiding by the rules set by the tax authority.

The article regarding the struggles China has faced with transfer pricing sets up an argument. The argument is instead of focusing on reviews after the fact, focus on stopping transfer mispricing in its tracks while it is occurring. The government, like most other governments, focus on how to respond to the acts of price manipulation. These responses are generally after the mispricing has been done and the investigation generally takes a large amount of time. Often, these investigations are failures as the companies committing these illegalities slip right under the investigators’ fingers. In order to potentially prevent this from happening, the article proposes that China better educates its local tax officials on what price manipulation is. They also suggest a stronger cooperation with other countries in distributing information about transfer price offenders. These strategies can be performed by all countries to reduce and hopefully eventually prevent transfer mispricing.

Transfer pricing is a key issue with both individual companies and entire countries. It is a key driving force that sways a country’s taxable revenue as well as a corporation’s income. The uncertainty of transfer pricing is what makes both companies and countries very precautious. A stronger, more uniform tactic to stop the disputes of transfer pricing can serve as a useful tool as training can be done in multiple areas since they will all share the same method. Overall, trading internationally needs to have more defined regulations.

Appropriate Behavior of Business Etiquette

Professional Etiquette is an important facet of working in a business environment. In the workplace, people understand that there needs to exist a certain type of behavioral dynamic that makes it possible to work harmoniously with others by adhering to minimum standards or norms of appropriate interactions. While there are numerous resources on a wide range of subjects that deal with professional etiquette, in this article we are going to look at, what some would consider more trivial aspects of behavior in the workplace, but which are just as important as the others:

Let’s begin with cell phones. If a phone call must be taken at the workplace it is considered professional to speak in a low volume and to especially keep the conversation as short as possible. Discussing loudly and boisterously with a friend about the plans for the weekend is not a conversation worthy of attention at the workplace.

Maintaining a safe ‘phone distance’ is also just as important so as to not make people uncomfortable by being within earshot of a private conversation. A safe distance is generally considered to be anywhere from 10 – 15 feet.

Put the phone away while at a meeting or a meal. Checking it constantly gives the impression of isolating oneself and not engaging with others around you. This is just another way of being unsocial and is considered rude.

It is not professional to borrow something from someone’s desk or workspace without getting their permission first.

There must always be a sense of general cleanliness whether it is doing something work related or not. Even if it entails cleaning up behind oneself at the water fountain or kitchen, it is good to not assume someone else will cleanup behind us.

Gossiping or slandering at the workplace is never professional. As a general principle it is always better to never talk about someone else regardless of whether it is positive or negative. Personal boundaries are just as important as professional boundaries and apply to one and others around you.

If a coworker’s behavior is affecting the way you do your own work, make sure to address it directly with the person in a tactful and professional manner. Confrontations and boundaries can be made without stooping to uncivil levels. Making a scene or threatening to complain to the boss is not the right manner in which to handle it.

Dressing appropriately is a fundamental tenet of business etiquette. Dressing professionally not only helps us to be in the right mindset to work but also allows coworkers around us to be comfortable in our presence. See-through shirts, skin tight clothes and plunging necklines don’t create the right atmosphere for the workplace.

And lastly, just being nice to people in general goes a long way. While it is important to be professional and formal when necessary, it does not have to be at the expense of basic courtesy or decency. Warm smiles, genuine handshakes and a polite disposition speak volumes of professional etiquette.

It is important to conduct Business Etiquette Training to ensure that employees are displaying acceptable behaviours that support international business etiquette norms. This has a positive impact on relationships and productivity.

MMM Training Solutions conducts soft skills training, executive coaching and leadership training programs for corporates in India and abroad. We are experts in the field of business etiquette training. Our training programs are customised based on the objectives, experience of the target audience and the type of industry. We have been in business since 2005 and some of our clients include Daimler, Standard Chartered Bank, Microsoft, Novartis, Cipla, Deloitte, Caterpillar and many more. Pramila Mathew, Owner and Founder of MMM, has a dual background in Business and Psychology and has significant work experience in both India and USA. Please visit our website MMMTS.COM to know more about our programs and our trainers.

Fine Aspects of Translation Agencies

Have you ever wondered or asked yourself what exactly online translation companies do? Then worry no more since this article will enlighten you about everything that goes on or takes place in a translation company.

Companies majorly handle the translation of one language to another. This is done in a couple of fields like document, website, legal aid, medical, financial, technical, marketing and many other kinds of translations.

Am guessing the major question still on your mind is why online? Well, most translations agencies are online simply because they aim at enabling you acquire their translation services from wherever you are across the whole continent.

Let me give you a scenario of online shopping as an example. People always shop online solely because they can’t access those goods or services in their home areas. Now, when gazing through the goods online, you find the goods you have been looking for let say are only available in China and all the descriptions plus the details about them are in Chinese. Meaning you barely understand anything about those goods but you can’t forego them because it’s your business.

I think even before I say anything else now, you already have an idea about what online translation agencies do simply by this example. An online agency will help you translate each and every detail about the goods in the very shortest time possible which will empower smooth online shopping for you.

The other justification for online translation agencies is speed. Most online translation companies have very fast turnaround time in conjunction with accuracy and reliability in providing you with translation services. This makes sense in a way that you will just sit in one place, submit your document or website in any language for translation and instantaneously receive your translations as you requested. This is very essential let say in a field like medical translations where the victim needs quick attention because the more you delay looking around for translations, the more you put his life at risk.

Online translation agencies also happen to be cost effective. That sounds great, right? That’s true because you will not have to travel the whole world looking for translations in particular languages which may happen to be so dear in terms of transport costs. But all you need with online translations companies is your computer and internet and you will be good to go. The mere costs you may face are for the translation services you get which are affordable in my view.