Exam 14: Multinational Tax Management

The U.S.Internal Revenue Service can reallocate revenues and expenses between parent corporations and their subsidiaries to more clearly reflect a proper allocation of income.In such instances it is the responsibility of the corporation to prove that the IRS has been arbitrary in its decision-making,thus establishing a "guilty until proven innocent" tax approach.

The basic idea behind withholding taxes for foreign investors is

The two basic approaches to national tax systems are

Jensen Optimetrics Inc.is based in a country with a territorial approach to taxation but generates 100% of its income in a country with a worldwide approach to taxation.The tax rate in the country of incorporation is 25%,and the tax rate in the country where they earn their income is 50%.In theory,and barring any special provisions in the tax codes of either country,Jensen should pay taxes at a rate of ________.

The value-added tax is

A tax that is a form of social redistribution of income is defined as a/an ________ tax.

Which of the following is an unlikely objective of U.S.government policy for the taxation of foreign MNEs?

Among the G7 nations,the U.S.has a below average corporate income tax rate that makes it attractive for other countries to invest in the U.S.

A foreign subsidiary has $2,000,000 of taxable income,a (foreign)corporate tax rate of 25%,and a foreign dividend withholding rate of 10%.The U.S.(domestic)parent has a corporate tax rate of 30%.What are the additional taxes paid by the U.S.domestic parent after the foreign subsidiary pays corporate and withholding taxes? Assume that the foreign subsidiary is 100% owned by the U.S.parent and that all after-tax income is paid to the U.S.parent.

Domestic tax neutrality means that

General Motors operates in many different countries and pays taxes at many different rates.However,they always pay the same rate as their local competitors.General Motors is operating in an environment of ________ tax policy.

What is a value-added tax? Where is this type of tax in wide usage? Why do you suppose this form of taxation has not been widely accepted in the United States?

Some countries assess extremely low corporate income tax rates on foreign source income in order to

In the mid 1980s the U.S.led the way to higher corporate income tax rates worldwide. Today,most of the G7 nations have surpassed the U.S.and have higher corporate income tax rates than the U.S.

Instruction 14.1: Use the information to answer the following question(s). Rogue River Exporters USA has $100,000 of before-tax foreign income. The host country has a corporate income tax rate of 25% and the U.S. has a corporate income tax rate of 35%. -Refer to Instruction 14.1.If the U.S.treated the taxes paid on income earned in the host country as a tax-deductible expense,then Rogue River's total U.S.corporate tax on the foreign earnings would be ________.

The pricing of goods,services,and technology transferred to a foreign subsidiary from an affiliated company,transfer pricing,is the first and foremost method of transferring funds out of a foreign subsidiary.When engaged in transfer pricing managers must consider at least two basic factors; Fund Positioning Effect and the Income Tax Effect.Explain each of these effects.

Instruction 14.1: Use the information to answer the following question(s). Rogue River Exporters USA has $100,000 of before-tax foreign income. The host country has a corporate income tax rate of 25% and the U.S. has a corporate income tax rate of 35%. -Refer to Instruction 14.1.If the U.S.has no bilateral trade agreement with the host country,what is the total amount of income taxes Rogue River Exporters will pay?

Explain the worldwide and territorial approaches of national taxation.The authors state that the United States uses both approaches.How can this be? Give an example of each taxation approach.

Which of the following factors is NOT important for U.S.corporations for determining the amount of foreign tax credit allowed for direct taxes paid on income in a foreign country?

All indications are that the value-added tax will soon be the dominant form of taxation in the U.S.