In some cases, an international company legally can keep more profit after taxes by allocating work and prices.
Answer the following statement true (T) or false (F)
True
In certain circumstances, an IC may have a choice of two or more countries in which to declare profits, such as happens when two or more units of the IC cooperate in supplying components or services under a contract with an external customer. Headquarters might then have one unit or subsidiary charge the customer higher prices than the other, with the result that one books more profit than the other. If the host country of one of the subsidiaries has lower taxes than the other host countries, the IC will try to maximize profits in the lower-tax country and reduce them in the higher-tax country. Other factors that affect the allocation of profit among host countries include country differences in currency controls, labor relations, political climate, and social unrest. It is sensible to direct as much profit as reasonably possible to subsidiaries in countries with the fewest currency controls, the best labor relations and political climate, and the least social unrest.
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