What would be the effect on zen total taxes

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Question - Zen Manufacturing, Incorporated, is a multinational firm with sales and manufacturing centers in 15 countries. One of its manufacturing divisions, in country X, sells a product to a retail division in country Y for $300,000 per unit. The division in country X has manufacturing costs of $150,000 for this product. The retail division in country Y sells the product to final customers for $450,000 per unit. Zen is considering adjusting its transfer prices to reduce its 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?

Reference no: EM133095043

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