Tax and Accounting Implications of Transfer Pricing

CASE STUDY ASSIGNMENT 2
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Table of Contents
Introduction......................................................................................................................................3
a) Tax and Accounting Implications................................................................................................3
b) Transfer pricing...........................................................................................................................3
Conclusion.......................................................................................................................................5
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Introduction
The case study assessment is concerned on the tax and accounting implications on Goodwill Net
Pvt Ltd along with relevant regulatory issues (Goodwill Net Pvt Ltd.com). In this regard, the
concept of transfer pricing is analyzed briefly in association with socio-political, ethical and the
economic repercussions of the concept transfer pricing are discussed in the case study.
a) Tax and Accounting Implications
One of the important dimensions for an efficient management system is the accounting
implications (Taylor and Williams 2017). The other one that is related with the accounting
implications is the taxation principles that are required for making commercial and financial
decisions. The various implications of taxation and accounting are described here.
In case study, the inventory related costs of Goodwill Net Pvt Ltd could be reduced by
implementing the transfer pricing structure in the accounting procedure of the concerned firm.
However, this may lead the concerned company to have a negative impact on their accounting
structure as transfer pricing is been used mainly for tax reduction purpose (Kawano and Slemrod
2016).
Goodwill Net Pvt Ltd can reduce or eliminate its supply chain levels by reducing their inventory
costs. This will lead the concerned parent company to establish its shell manufacturing company
in its own premises. However, the concerned person Shawn wants to establish a new shell-
manufacturing unit in order to avoid tax payment.
Goodwill Net Pvt Ltd may opt for vertical supply process to control its costs that will lead to the
increase of its profits (Mora and Walker 2015). This will result to the tax minimization process.
However, the concerned company is not willing to do so as it wants to avoid tax over all of its
revenues.
b) Transfer pricing
Transfer pricing is the term used for the price using which different sectors under the same
company make transactions among them. This price is mainly used when the individual divisions
of a large company are treated as separately running entities. As stated by Rehman et al. (2018),
the process of transfer pricing is mainly used to avoid the payment of tax as it shows as the
transaction between the same types of entities. In the required case study, the term transfer price
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