The whole transfer pricing issue is a fascinating one. Essentially it's the mechanism whereby multinationals have broken loose of the control of nations.

Here's a good overview from that most left wing and revolutionary source - a tax accountant writing in Forbes:

http://www.forbes.com/2010/06/24/tax...heppard_2.html

Newspapers use the phrase "transfer pricing" as shorthand for multinational corporations shifting profits to tax havens to avoid tax in developed countries.

Tax professionals bristle at this characterization, arguing that transfer pricing is a neutral phrase to describe the process by which profits are allocated among different jurisdictions as though corporate affiliates were separate economic actors transacting with each other at arm's length.

The newspapers are correct. The members of large multinational groups of corporations are not separate economic actors. The point of vertical integration is not to have to pay arm's-length prices for some goods and services. It is a fool's errand to try to divine arm's-length prices for intragroup transactions, particularly for valuable intellectual property (IP) that is never licensed to outsiders.