Fixing The Bottom Line

HIGH ON THE LIST OF GAMES MULTINATIONAL CORporations can play is so-called transfer pricing, or the assigning of arbitrary values to cross-border shipments of parts and materials to foreign subsidiaries depending on how they affect the bottom line. The IRS in Washington has long charged that many Japanese firms doing business in the U.S. artificially inflate the value of Stateside deliveries to reduce the profits — hence the taxes — of their American subsidiaries. Now one of Japan’s largest consumer-electronics manufacturers, Matsushita Electric Industrial Co., has agreed to a new pricing method designed to head off questions through advance consultations. Matsushita, whose consumer-appliance brands include Panasonic and National, became the first major Japanese firm to adopt the new system. If approved by President-elect Bill Clinton, who has claimed during the campaign that foreign firms were underpaying U.S. taxes, it could well set a pattern.