Transfer Pricing; Ethics Zen Manufacturing Inc. is a multinational firm with sales and manufacturing units in 15 countries. One of its manufacturing units, in country X, sells its product to a retailunit in country Y for $300,000. The unit in country X has manufacturing costs of $150,000 for theseproducts. The retail unit in country Y sells the product to final customers for $450,000. Zen is considering adjusting its transfer prices to reduce overall corporate tax liability.Required1. Assume that both country X and country Y have corporate income tax rates of 40% and that no specialtax treaties or benefits apply to Zen. What would be the effect on Zen’s total tax burden if the manufacturing unit raises its price from $300,000 to $360,000?2. What would be the effect on Zen’s total taxes if the manufacturing unit raised its price from $300,000 to$360,000 and the tax rates in countries X and Y are 20% and 40%, respectively?3. Comment on any ethical issues you observe in this case
Transfer Pricing; Ethics Zen Manufacturing Inc. is a multinational firm with sales and manufacturing units in 15 countries. One of its manufacturing units, in country X, sells its product to a retail
unit in country Y for $300,000. The unit in country X has
products. The retail unit in country Y sells the product to final customers for $450,000. Zen is considering adjusting its transfer prices to reduce overall corporate tax liability.
Required
1. Assume that both country X and country Y have corporate income tax rates of 40% and that no special
tax treaties or benefits apply to Zen. What would be the effect on Zen’s total tax burden if the manufacturing unit raises its price from $300,000 to $360,000?
2. What would be the effect on Zen’s total taxes if the manufacturing unit raised its price from $300,000 to
$360,000 and the tax rates in countries X and Y are 20% and 40%, respectively?
3. Comment on any ethical issues you observe in this case
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