Large multinational enterprises (MNEs) may use a variety of strategies to manipulate the pricing of their products and services for tax avoidance purposes, including: 1. **Transfer pricing**: MNEs may manipulate the prices of related-party transactions (such as intra-company sales and purchases of products or services) to shift profits from higher-tax countries to lower-tax countries. This may be achieved by charging lower prices to related parties in low-tax countries or higher prices to related parties in high-tax countries. 2. **Charging fees through affiliates**: MNEs may charge fees or royalties to their affiliates in low-tax countries to reduce their taxable income in high-tax countries. 3. **Product sales and allowances**: MNEs may provide allowances or other forms of product sales support to their affiliates in high-tax countries to reduce their sales revenue in those countries. 4. **Cost sharing arrangements**: MNEs may use cost sharing arrangements to allocate research and development, marketing, and other expenses to high-tax countries, thereby reducing their profits in those countries. 5. **Base Erosion and Profit Shifting (BEPS)**: MNEs can use complex structures to shift profits from high-tax countries to low-tax countries, often by manipulating the pricing of products and services. 6. **Arguable Market Price (ARM)**: MNEs can use the ARM principle to charge higher prices to affiliates in high-tax countries or lower prices to affiliates in low-tax countries, thereby manipulating their profits in each country. 7. **Internal Currency Financing and Investment**: MNEs can use internal currency financing and investment arrangements to transfer funds from high-tax countries to low-tax countries and reduce their taxable income in high-tax countries. These strategies can be implemented in a variety of ways, including: 1. **Transfer pricing in violation of the arm principle**: MNEs may negotiate related-party transaction prices below or above the arm price, thereby manipulating profits and losses. 2. **Use of unusual or unusual loans**: MNEs may use unusual or unusual loans to shift profits from high-tax countries to low-tax countries. 3. **Use of complex cost-sharing arrangements**: MNEs may use complex cost-sharing arrangements to shift expenses and expenditures from high-tax countries to low-tax countries. 4. **Creation of artificial thin-fluid DROPs**: MNEs may create artificial liquid assets or liabilities to shift income from high-tax countries to low-tax countries. These strategies are often viewed as formalistic or artificial and lack economic substance, and are challenged and dealt with by national tax authorities and international organizations such as the Organization for Economic Cooperation and Development (OECD) and the Group of Twenty (G20). In response to these practices, many countries have implemented various anti-tax avoidance measures, including: 1. **Transfer pricing regulations**: Governments implement transfer pricing regulations to ensure that MNEs account for related-party transactions at arm's length prices. 2. **Stringent reporting requirements**: Governments introduce strict reporting requirements to make MNEs more transparent about their tax arrangements. 3. **Proposed global minimum tax rates**: The G20 and OECD have proposed the implementation of a global minimum tax rate to prevent MNEs from shifting profits to countries with lower tax rates. 4. **Enhance tax administrative cooperation**: Governments and international organizations are working to enhance tax administrative cooperation to share intelligence, coordinate tax policies, and combat cross-border tax avoidance. However, the abuse of transfer pricing and other tax reduction strategies remains a subject of ongoing debate and negotiations between governments, international organizations, and MNEs.