Question 1

________ is the pricing of goods, services, and technology between related companies.

Accepted Answer

A)  Among pricing 
B)  Retail pricing 
C)  Transfer pricing 
D)  Wholesale pricing 
A)  Among pricing 
B)  Retail pricing 
C)  Transfer pricing 
D)  Wholesale pricing

Question 2

Instruction 21.1:
Use the information to answer 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 21.1. If the U.S. treated the taxes paid on income earned in the host country as a tax-credit, then Rogue River's total U.S. corporate tax on the foreign earnings would be ________.

Accepted Answer

A)  $51,250 
B)  $35,000 
C)  $26,250 
D)  $10,000 
A)  $51,250 
B)  $35,000 
C)  $26,250 
D)  $10,000

Question 3

The issue of ethics in the reporting of income and the payment of taxes is a considerable one. The authors state that most MNEs operating in foreign countries tend to follow the general principle of

Accepted Answer

A)  "when in Rome, do as the Romans do." 
B)  full disclosure to the tax authorities. 
C)  maintain a competitive playing field by cheating as much as the local competition, no more, no less. 
D)  none of the above. 
A)  "when in Rome, do as the Romans do." 
B)  full disclosure to the tax authorities. 
C)  maintain a competitive playing field by cheating as much as the local competition, no more, no less. 
D)  none of the above.

Question 4

Instruction 21.1:
Use the information to answer 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 21.1. 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?

Accepted Answer

A)  $25,000 
B)  $35,000 
C)  $51,250 
D)  $60,000 
A)  $25,000 
B)  $35,000 
C)  $51,250 
D)  $60,000

Question 5

What is the total value of taxes paid in the following example if the value added tax is 10%? A farmer raises wheat that he sells for $1.50 to the grain company. The grain company sells to the processor for $2.00 per bushel. The processor turns the wheat into a breakfast cereal and wholesales it for $3.00 per bushel. The retailer sells the cereal for $4.00 per bushel.

Accepted Answer

A)  $0.15 
B)  $0.20 
C)  $0.30 
D)  $0.40 
A)  $0.15 
B)  $0.20 
C)  $0.30 
D)  $0.40

Question 6

Domestic tax neutrality means that

Accepted Answer

A)  a dollar earned anywhere in the world by a U.S. corporation is taxed the same as if earned in the U.S. 
B)  tax rates are neither regressive nor progressive. 
C)  foreign affiliates must neutralize their income by subtraction of foreign investment credits. 
D)  all of the above. 
A)  a dollar earned anywhere in the world by a U.S. corporation is taxed the same as if earned in the U.S. 
B)  tax rates are neither regressive nor progressive. 
C)  foreign affiliates must neutralize their income by subtraction of foreign investment credits. 
D)  all of the above.

Question 7

________ is NOT an "arm's length price" method of determining transfer prices among parent and affiliated firms.

Accepted Answer

A)  Comparable uncontrolled price method 
B)  Resale price method 
C)  Cost-plus method 
D)  All of the above are acceptable methods. 
A)  Comparable uncontrolled price method 
B)  Resale price method 
C)  Cost-plus method 
D)  All of the above are acceptable methods.

Question 8

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?

Accepted Answer

A)  the Foreign corporate income tax rate 
B)  the U.S. corporate income tax rate 
C)  the foreign corporate dividend withholding tax rate 
D)  All of the above are important factors. 
A)  the Foreign corporate income tax rate 
B)  the U.S. corporate income tax rate 
C)  the foreign corporate dividend withholding tax rate 
D)  All of the above are important factors.

Question 9

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

Accepted Answer

A)  attract tax haven affiliates of foreign multinationals. 
B)  boost the value of their domestic currency. 
C)  support higher taxes of their domestic companies. 
D)  none of the above. 
A)  attract tax haven affiliates of foreign multinationals. 
B)  boost the value of their domestic currency. 
C)  support higher taxes of their domestic companies. 
D)  none of the above.

Question 10

A country CANNOT have both a territorial and a worldwide approach as a national tax policy.

Accepted Answer

A) True 
 B)False

Question 11

________ taxes are applied to income and ________ taxes are applied to some other measurable performance characteristic of the firm.

Accepted Answer

A)  Income; direct 
B)  Indirect; income 
C)  Indirect; direct 
D)  Direct; indirect 
A)  Income; direct 
B)  Indirect; income 
C)  Indirect; direct 
D)  Direct; indirect

Question 12

Instruction 21.1:
Use the information to answer 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 21.1. If the U.S. has a bilateral trade agreement with the host country that calls for the total tax paid to be equal to the maximum amount that could be paid in the highest taxing country, what is the total amount of income taxes Rogue River Exporters will pay to the host country, and how much will they pay in U.S income taxes on the foreign earned income?

Accepted Answer

A)  $25,000; $10,000 
B)  $25,000; $26,250 
C)  $35,000; $0 
D)  None of the above 
A)  $25,000; $10,000 
B)  $25,000; $26,250 
C)  $35,000; $0 
D)  None of the above

Question 13

Tax treaties typically result in ________ between the two countries in question.

Accepted Answer

A)  lower property taxes for U.S. citizens overseas 
B)  elimination of differential tax rates 
C)  increased double taxation 
D)  reduced withholding tax rates 
A)  lower property taxes for U.S. citizens overseas 
B)  elimination of differential tax rates 
C)  increased double taxation 
D)  reduced withholding tax rates

Question 14

Depending on the host country, corporate income taxes worldwide may be as low as ________.

Accepted Answer

A)  0% 
B)  5% 
C)  10% 
D)  15% 
A)  0% 
B)  5% 
C)  10% 
D)  15%

Question 15

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.

Accepted Answer

The worldwide approach taxes the income

Question 16

The purpose of a withholding tax on dividend income is to

Accepted Answer

A)  raise the effective as rate of the local host country. 
B)  provide an incentive for MNEs to pay higher dividends to their parent companies. 
C)  obtain a minimum tax payment on the incomes of dividend income receipts. 
D)  encourage MNEs to reposition profits outside of their countries. 
A)  raise the effective as rate of the local host country. 
B)  provide an incentive for MNEs to pay higher dividends to their parent companies. 
C)  obtain a minimum tax payment on the incomes of dividend income receipts. 
D)  encourage MNEs to reposition profits outside of their countries.

Question 17

The basic idea behind withholding taxes for foreign investors is

Accepted Answer

A)  to receive taxes on passively earned income. 
B)  a recognition that most foreign investors are unlikely to file taxes in the host country. 
C)  to ensure that income earned is taxed by the host country. 
D)  all of the above. 
A)  to receive taxes on passively earned income. 
B)  a recognition that most foreign investors are unlikely to file taxes in the host country. 
C)  to ensure that income earned is taxed by the host country. 
D)  all of the above.

Question 18

A value-added tax has gained widespread usage in Western Europe, Canada, and parts of Latin America.

Accepted Answer

A) True 
 B)False

Question 19

TABLE 21.1
Uses the information to answer following question(s).
MetroCity Designs Inc., located in Northern California, has two international subsidiaries, one located in the Ukraine, the other in Korea. Consider the information below to answer the next several questions.
  
-Refer to Table 21.1. What is the minimum effective tax rate that MetroCity can achieve on its foreign-sourced income?

Accepted Answer

A)  26% 
B)  35% 
C)  40% 
D)  0% 
A)  26% 
B)  35% 
C)  40% 
D)  0%

Question 20

Transfer pricing is a strategy that may be used by MNEs to

Accepted Answer

A)  reduce consolidated corporate income taxes. 
B)  partially finance a subsidiary in another country. 
C)  transfer funds from a subsidiary to the parent corporation. 
D)  all of the above. 
A)  reduce consolidated corporate income taxes. 
B)  partially finance a subsidiary in another country. 
C)  transfer funds from a subsidiary to the parent corporation. 
D)  all of the above.

________ is the pricing of goods, services, and technology between related companies.

The issue of ethics in the reporting of income and the payment of taxes is a considerable one. The authors state that most MNEs operating in foreign countries tend to follow the general principle of

Domestic tax neutrality means that

________ is NOT an "arm's length price" method of determining transfer prices among parent and affiliated firms.

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?

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

A country CANNOT have both a territorial and a worldwide approach as a national tax policy.

taxes are applied to income and taxes are applied to some other measurable performance characteristic of the firm.

Tax treaties typically result in ________ between the two countries in question.

Depending on the host country, corporate income taxes worldwide may be as low as ________.

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.

The purpose of a withholding tax on dividend income is to

The basic idea behind withholding taxes for foreign investors is

A value-added tax has gained widespread usage in Western Europe, Canada, and parts of Latin America.

Transfer pricing is a strategy that may be used by MNEs to

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

The Foreign Exchange Market

International Parity Conditions

Foreign Exchange Rate Determination and Forecasting

Foreign Currency Derivatives

Transaction Exposure

Operating Exposure

Translation Exposure

Global Cost and Availability of Capital

Sourcing Equity Capital Globally

Financial Structure and International Debt

Interest Rate and Currency Swaps

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Strategy

Political Risk Assessment and Management

Multinational Capital Budgeting

International Trade Finance

Working Capital Management

Filters

Exam 21: Multinational Tax Management

________ is the pricing of goods, services, and technology between related companies.

The issue of ethics in the reporting of income and the payment of taxes is a considerable one. The authors state that most MNEs operating in foreign countries tend to follow the general principle of

Domestic tax neutrality means that

________ is NOT an "arm's length price" method of determining transfer prices among parent and affiliated firms.

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?

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

A country CANNOT have both a territorial and a worldwide approach as a national tax policy.

________ taxes are applied to income and ________ taxes are applied to some other measurable performance characteristic of the firm.

Tax treaties typically result in ________ between the two countries in question.

Depending on the host country, corporate income taxes worldwide may be as low as ________.

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.

The purpose of a withholding tax on dividend income is to

The basic idea behind withholding taxes for foreign investors is

A value-added tax has gained widespread usage in Western Europe, Canada, and parts of Latin America.

Transfer pricing is a strategy that may be used by MNEs to

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

The Foreign Exchange Market

International Parity Conditions

Foreign Exchange Rate Determination and Forecasting

Foreign Currency Derivatives

Transaction Exposure

Operating Exposure

Translation Exposure

Global Cost and Availability of Capital

Sourcing Equity Capital Globally

Financial Structure and International Debt

Interest Rate and Currency Swaps

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Strategy

Political Risk Assessment and Management

Multinational Capital Budgeting

International Trade Finance

Working Capital Management

Filters

taxes are applied to income and taxes are applied to some other measurable performance characteristic of the firm.