A Case Study On The Multinational Business Of Transfer Pricing Of GITI Tire Corporation

Since the economic globalization waves kept coming, more and more countries and regions have been involved in the connection of the world market and international economic. Multinational enterprises keep growing rapidly and continuously, a large number of them set transfer pricing as the important strategic goal of internal affiliated enterprise. Transfer pricing is a neutral behavior indeed, however, based on the unique features of multinational companies, they always take various means, such as internal control, to manipulate transfer pricing improperly in order to evade international tax for the sake of taxation or management.From the perspective of enterprise, reasonable and appropriate connected transaction is helpful to increase the efficiency of the overall operation; conversely, unreasonable or too much connected transaction be bad for the enterprise’s long-term development as well as the cultivation of core competitiveness and the shaping of brand. Take these into consideration, they have to pay attention to the compliance problems of transfer pricing in China. As one of the pillar industries of national economy, automobile and parts industry will undoubtedly be involved with the transfer pricing in their multinational business connected transaction.Start with the basic problem of transfer pricing between GITI TIRE CORPORATION, a sino-foreign joint venture enterprise and its affiliated enterprise, this paper expounds the principle of transfer pricing, introduces and evaluates several transfer pricing methods, then determines which one is suitable for target enterprise by analyzing the enterprise internal and external management characteristics and its financial data. Further, the comprehensive comparative analysis method is used to demonstrate the rationality of transfer pricing, which is taken by selecting reasonable profit and similar enterprises of the external characteristics, analyzing the history data in three years and comparing their profit ratios with GITI TIRE CORPORATION’S through the method of "quartile range". At last, we expect to put forward some new enlightenment by deducting the transfer pricing problem from one enterprise to the whole industry.