Went for cost priced at cost? An economic approach to the transfer pricing of offshored business services
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What are the implications of the rapid growth in offshored business services for transfer pricing, the pricing of products traded between affiliated firms? I explore these implications through a case study of transnational corporations in the teleservices industry. Teleservices firms own foreign affiliates that provide inbound and outbound call services to third party clients. Economic analysis, applied to the facts and circumstances of the industry, is used to develop pricing rules for offshored call centres, including the implications for location savings. Even though the catchphrase "Went for cost, stayed for quality" does apply to teleservices as it does in other offshored business services, I conclude that "Went for cost, priced at cost" is the appropriate transfer-pricing maxim for tax authorities and firms to follow. offshoring, outsourcing, transfer pricing, business services, teleservices, international taxation.
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