Increase of price app in Japan and the issue of transfer pricing for multinational companies.

Economic exposure happens when business doing abroad. Common risks for economic exposure are fluctuation of exchange rates, unstable governments and shaky economies. These factors have an effect on company's cash flow and earnings. But from long term view the potential for doing business abroad makes the risks acceptable to most businesses. 

On October 16, 2013 Apple gives notification to the developers that Japanese iOS app store will increase. This is due to likely the economic hardship and continued restoration against the dollar. Though Apple have not yet given detail how fair it plans to adjust the price but it could be similar to a 2011 price jump that effected UK. At times, the price apps bounce from 0.59 pound to 0.69 pound. The new Pricing Matrix for Japan can be viewed on iTunes Connect and the updates of Paid Applications contracts will available after the price adjustment goes live. The new prices should be mount soon. The iOS and Mac App Stores in Japan have not yet receive Apple's new prices. 

The weak yen and the restoration against US dollar make Apple decide to increase the price of Apps. Apple. Apple decide to do this because if they don't their profit in Japan will gain losses and because  Japan gaining restoration with US Dollar the company decide to grab these opportunities to increase the prices and gain more earnings and cash flow.  So the pricing matrix and paid applications contracts will be changed and it will be available and viewed after the company decide the fixed price adjustment since the unstable of Japan currency rate cannot make the company decide directly the fixed price. It will be risky for Apple to do this because this can make the Japanese consumer buy Apple's apps less. 

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Transfer pricing are charges for goos and services between controlled legal entities within an enterprise or companies. In the principle of transfer pricing, the transfer price should be according either what the seller would charge in an independent, arm's length customer or what the buyer would pay in an independent, arm's length supplier. Today transfer pricing is misused by multinational companies such as  transfer pricing is used to lower profits in a division of an enterprise that is located in a country with high level of taxes or raise profits in a country with no or law taxes as a tax haven. Transfer pricing is also a major tool for corporate to do tax avoidance. 

Companies such as Google, Starbuck and Amazon used transfer pricing to avoid paying high taxes. It is because those multinational companies have complex tax structure and will pay more taxes amount (billions) compare to small or medium companies. In addition those companies are undoubtedly under competitive pressures from local and foreign competitors. 

Starbucks had sales of £400m in the UK last year but does not pay corporation tax at all. It transferred some money to their sister company in Dutch in royalty payments, bought coffee beans from Switzerland and pay high interest rates to borrow from other parts of business. 

Amazon which sales in the UK is £3.35bn in 2011 but only reported pay tax expense in £1.8m. Moreover, Google's UK unit just paid £6m to the Treasury on UK turnover  of £395m

In my opinion, these companies does not do anything illegal because avoiding tax is legal for them since they are large companies with multiple locations. Also, multinationals companies have more opportunity to make locational decisions and each locations or countries they decide to operate have different tax regulation. In addition, those three companies also face with competitive pressure and these cause their expenses to be expensive. For me they avoid tax or pay lower tax because of legitimate business reasons.