Question 3 - Week 12 - Transfer Pricing

Please refer to the direct quotation below from the Australian Taxation Office (ATO) website: www.ato.gov.au for this question. Consider the following extract: "Base erosion and profit shifting (BEPS) refers to the tax planning strategies used by multinational companies to exploit gaps and differences between tax rules of different jurisdictions internationally. This is done to artificially shift profits to low or no-tax jurisdictions where there is little or no economic activity."

Please discuss whether taxing "Revenue" instead of "Profit" will solve the Transfer Pricing issue. You must elaborate your answer with appropriate analysis and justification.

Required: Note - Please use the following four (4) steps to answer this question:

1. Identify the facts

2. Identify the relevant Tax Laws and cases or other key Tax sources

3. Apply the relevant laws and cases to the facts

4. Provide a conclusion