A Scenario for Conflict

The delicate balance between the interests of MNEs and their host or home governments is even more important than ever. Transfer pricing is one crucial area where it is essential that this balance is maintained. Frequent legislative changes and the differing regimes of jurisdictions continue to increase the burden of compliance for MNEs and provide fertile ground for conflict. Yet, I need to make it very clear that fractious relationships between MNEs and the taxing authorities are not the only source of conflict arising from transfer pricing policies. Figure 3.1 provides a graphic illustration of the extent of this policy conflict.

Figure 3.1. Possible fractious relationships.

When related entities transfer products ...

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