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Global Enterprises has a manufacturing affiliate in Country A that incurs costs of $600,000 for goods that it sells to its sales affiliate in Country
Global Enterprises has a manufacturing affiliate in Country A that incurs costs of $600,000 for goods that it sells to its sales affiliate in Country B. The sales affiliate resells these goods to final consumers for $1,700,000. Both affiliates incur operating expenses of $100,000 each. Countries A and B levy a corporate income tax of 35 percent on taxable income in their jurisdictions. Required: If Global Enterprises raises the aggregate transfer price such that shipments from its manufacturing to its sales affiliate increase from $1,000,000 to $1,200,000, what effect would this have on consolidated taxes
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