Transfer Pricing is the name of the gamut of shifting profits to low tax jurisdictions to avoid taxes in countries where corporations have substantial trading operations.
Globalization has enabled a company to design its product in country A, manufacture in B, and hold patents elsewhere and this structure gives discretion in allocating costs to each country. It also allows for shifting profits across borders.
Tax rules require companies to use “arm’s length” or normal commercial prices to transfer goods and services, but such prices are not always easy to determine.
IRS whistlebowers may even the playing field and are entitled to 30% of what the US government recovers. If you are aware of an illegal transfer pricing scheme, contact experienced legal counsel for a free consultation.