Talk:Branch plant economy

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I have reverted the edit stating that there may be little incentive to operate a branch plant at a profit, and that parent companies would operate at cost instead. There is always an incentive to make a profit. The question is, can you make sure that your profits are located in a low-tax jurisdiction instead of a high-tax one. Ways of doing this include "transfer pricing", e.g., parent company in low-tax country sells inputs to branch plant in high-tax country at a substantial mark-up to make sure that the branch plant doesn't make money. Or, it buys the branch plant's output at blow market value for the same reason. However, the Department of Finance has cottoned on to these strategies, and has developed transfer pricing rules to make sure that intra-corporate group transaction across borders occur at fair market value. There are also "thin capitalization rules" to prevent a parent from using debt transactions to drain profits out of Canada. Ground Zero 20:00, 16 Jun 2005 (UTC)

Nonetheless, highly relevant if considering the whole period from 1860 to present. User:Peter Grey 23:22, 16 Jun 2005 (UTC)

Since the Income Tax was introduced in 1917, I don't think there was an incentive to shift income in this manner before that. I don't know when the transfer pricing rules were introduced. Do you have a reference for the original statement? That would simplify things. Thanks. Ground Zero 13:17, 17 Jun 2005 (UTC)