Question Information is complete.

a) Troop Inc (US) is setting up a subsidiary in India and is considering the price to charge for one of the components ( a digital device that attaches to the treadmills) that it will produce in India and will ship to the US for further processing. The cost of producing the unit in India is 250 Rupees. Additional costs in the US would be $6 per component. The US tax rate is currently 30%, whereas the Indian tax rate for the subsidiary would be 25%. Using an exchange rate of Rupees76/$ calculate the total tax payable in $'s if the transfer price is (i) $8.00 per unit and (ii) $9.00 per unit. Troop Inc (US) expects to sell the digital device to customers in the US for $32. If Troop Inc (US) wishes to minimise global taxes which transfer price should it use? (15 marks) b) Explain what is meant is meant by the term 'transfer price'. Explain the arm's length rule with respect to transfer pricing and why governments may insist that multinational organisations use it as their transfer price. (10 marks) c) Nations typically structure their tax systems along one of two basic approaches: the worldwide approach or the territorial approach. Describe the two approaches and include an explanation of why problems arise due to countries using different systems. (15 marks) d) Describe the tax incentives a government might offer a multinational company and explain their potential advantages and disadvantages. (10 marks)