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Haidilao has two trading subsidiaries. One is tax resident in the country of Malaysia where the effective rate of corporation tax is 10%. This company

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Haidilao has two trading subsidiaries. One is tax resident in the country of Malaysia where the effective rate of corporation tax is 10%. This company extracts and exports greensand, the raw material used in the group's production processes. The open market price for greensand is $100 per tonne. The other subsidiary is resident in the country of Vietnam, where the effective tax rate is 40%. The Ruritanian subsidiary buy its raw materials in bulk from the Konganga subsidiary. The quantity purchased each year is 80,000 tonnes. Haidilao wishes to instruct the two subsidiaries to adopt a pricing policy that optimizes the after-tax profits for the group as a whole. Questions to be considered are: - Should the price charged by Malaysia be lower or higher than the price it might charge to an unrelated customer? - Which government might object to the pricing policy and why

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