Question 1

The term "capital-import neutrality" refers to

Accepted Answer

A) the criterion that an ideal tax should be effective in raising revenue for the government and not have any negative effects on the economic decision-making process of the taxpayer. 
B) the fact that taxable income is taxed in the same manner by the taxpayer's national tax authority regardless of where in the world it is earned. 
C) the criterion that the tax burden a host country imposes on the foreign subsidiary of a MNC should be the same regardless in which country the MNC is incorporated and the same as that placed on domestic firms. 
D) underlying principle that all similarly situated taxpayers should participate in the cost of operating the government according to the same rules. 
A) the criterion that an ideal tax should be effective in raising revenue for the government and not have any negative effects on the economic decision-making process of the taxpayer. 
B) the fact that taxable income is taxed in the same manner by the taxpayer's national tax authority regardless of where in the world it is earned. 
C) the criterion that the tax burden a host country imposes on the foreign subsidiary of a MNC should be the same regardless in which country the MNC is incorporated and the same as that placed on domestic firms. 
D) underlying principle that all similarly situated taxpayers should participate in the cost of operating the government according to the same rules.

Question 2

Assume that a product has the following three stages of production:   If the value-added tax (VAT)rate is 25%,what would be the VAT over all stages of production?

Accepted Answer

A) €187.50 
B) €120 
C) €150 
D) €225 
A) €187.50 
B) €120 
C) €150 
D) €225

Question 3

In a growing economy,the VAT would raise prodigious amounts of money

Accepted Answer

A) in a way almost invisible to tax-paying voters. 
B) in a way obvious to tax-paying voters. 
C) but would discourage savings. 
D) none of the above 
A) in a way almost invisible to tax-paying voters. 
B) in a way obvious to tax-paying voters. 
C) but would discourage savings. 
D) none of the above

Question 4

The U.S.IRS allows transfer prices to be set using

Accepted Answer

A) comparable uncontrolled price method. 
B) resale price method. 
C) cost plus approach. 
D) all of the above 
A) comparable uncontrolled price method. 
B) resale price method. 
C) cost plus approach. 
D) all of the above

Question 5

The current U.S.marginal tax rate for domestic nonfinancial corporations is 35 percent.

Accepted Answer

A) This is positioned pretty well in the middle of the rates assessed by the majority of countries, as reported in the PriceWaterhousCoopers annual Corporate Taxes: Worldwide summaries. 
B) Is positioned toward the upper end of the rates assessed by the majority of countries. 
C) But this is reduced on a dollar-for-dollar basis for any and all taxes paid to foreign governments, so this is an upper limit for the tax rate faced by U.S.MNCs. 
D) All of the above 
A) This is positioned pretty well in the middle of the rates assessed by the majority of countries, as reported in the PriceWaterhousCoopers annual Corporate Taxes: Worldwide summaries. 
B) Is positioned toward the upper end of the rates assessed by the majority of countries. 
C) But this is reduced on a dollar-for-dollar basis for any and all taxes paid to foreign governments, so this is an upper limit for the tax rate faced by U.S.MNCs. 
D) All of the above

Question 6

As a general rule,

Accepted Answer

A) excess tax credits can be carried back two years. 
B) excess tax credits can be carried forward five years. 
C) excess tax credits must be used in the year recognized. 
D) both a) and b) 
A) excess tax credits can be carried back two years. 
B) excess tax credits can be carried forward five years. 
C) excess tax credits must be used in the year recognized. 
D) both a) and b)

Question 7

The higher the transfer price

Accepted Answer

A) the higher the net profit reported by the MNC. 
B) the higher the gross profit of the receiving division relative to the transferring division. 
C) the higher the gross profit of the transferring division relative to the receiving division. 
D) none of the above 
A) the higher the net profit reported by the MNC. 
B) the higher the gross profit of the receiving division relative to the transferring division. 
C) the higher the gross profit of the transferring division relative to the receiving division. 
D) none of the above

Question 8

Under the territorial method of declaring a national tax jurisdiction

Accepted Answer

A) the possibility of double taxation exists if the parent county of a foreign affiliate also levies a tax on worldwide income. 
B) tax is levied on all income earned within the country by any taxpayer, domestic or foreign. 
C) tax is levied on foreign residents of the country on their home-country income but not foreign-earned income. 
D) none of the above 
A) the possibility of double taxation exists if the parent county of a foreign affiliate also levies a tax on worldwide income. 
B) tax is levied on all income earned within the country by any taxpayer, domestic or foreign. 
C) tax is levied on foreign residents of the country on their home-country income but not foreign-earned income. 
D) none of the above

Question 9

An uncontrolled foreign corporation is

Accepted Answer

A) an extension of the parent and is not an independently incorporated firm separate from the parent. 
B) an affiliate organization of the MNC that is independently incorporated in the foreign country, and one in which the U.S.MNC owns at least 51 percent of the voting equity stock. 
C) an affiliate organization of the MNC that is independently incorporated in the foreign country, and one in which the U.S.MNC owns at least 10 percent but less than 50 percent of the voting equity stock. 
D) b) and c) 
A) an extension of the parent and is not an independently incorporated firm separate from the parent. 
B) an affiliate organization of the MNC that is independently incorporated in the foreign country, and one in which the U.S.MNC owns at least 51 percent of the voting equity stock. 
C) an affiliate organization of the MNC that is independently incorporated in the foreign country, and one in which the U.S.MNC owns at least 10 percent but less than 50 percent of the voting equity stock. 
D) b) and c)

Question 10

The organizational form of a MNC can affect the timing of a tax liability.This means

Accepted Answer

A) the principle of tax equity might be violated. 
B) as long as regardless of the country in which an affiliate of a MNC earns taxable income, the same tax rates apply, then the tax due date doesn't matter. 
C) tax timing will even out over a reporting cycle, so there is no big deal here. 
D) none of the above 
A) the principle of tax equity might be violated. 
B) as long as regardless of the country in which an affiliate of a MNC earns taxable income, the same tax rates apply, then the tax due date doesn't matter. 
C) tax timing will even out over a reporting cycle, so there is no big deal here. 
D) none of the above

Question 11

Using transfer prices "creativity" MNCs can

Accepted Answer

A) try to move blocked funds (but the host country might be watching). 
B) evade tax liabilities (but the host country might be watching). 
C) both a) and b) 
D) both a) and b) and there's nothing that the host country government can do about it. 
A) try to move blocked funds (but the host country might be watching). 
B) evade tax liabilities (but the host country might be watching). 
C) both a) and b) 
D) both a) and b) and there's nothing that the host country government can do about it.

Question 12

The worldwide method of declaring a national tax jurisdiction

Accepted Answer

A) is also known as the residential method. 
B) is to tax national residents of the country on their worldwide income no matter in which country it is earned. 
C) is different from the territorial method of declaring a national tax jurisdiction. 
D) all of the above 
A) is also known as the residential method. 
B) is to tax national residents of the country on their worldwide income no matter in which country it is earned. 
C) is different from the territorial method of declaring a national tax jurisdiction. 
D) all of the above

Question 13

As a rule,payments to and from foreign affiliates,

Accepted Answer

A) involve the issue of transfer pricing. 
B) involve accounting values assigned to goods or services exchanged between foreign affiliates. 
C) involve tax credits trading between affiliates. 
D) both a) and b) 
A) involve the issue of transfer pricing. 
B) involve accounting values assigned to goods or services exchanged between foreign affiliates. 
C) involve tax credits trading between affiliates. 
D) both a) and b)

Question 14

A withholding tax is

Accepted Answer

A) an indirect tax. 
B) a direct tax. 
A) an indirect tax. 
B) a direct tax.

Question 15

Fundamentally,there are two types of tax jurisdiction:

Accepted Answer

A) The worldwide and the territorial. 
B) The residential and the visiting. 
C) The passive and the active income. 
D) The earned and the unearned. 
A) The worldwide and the territorial. 
B) The residential and the visiting. 
C) The passive and the active income. 
D) The earned and the unearned.

Question 16

Assume that a product has the following three stages of production:   If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

Accepted Answer

A) € 64 
B) €120 
C) €2,808 
D) €3,000 
A) € 64 
B) €120 
C) €2,808 
D) €3,000

Question 17

When the income tax rate in the host country is greater than the tax rate in the parent country,

Accepted Answer

A) it is beneficial to follow a high markup policy on transferred goods and services from the parent to a foreign affiliate. 
B) it is beneficial to follow a low markup policy on transferred goods and services from the parent to a foreign affiliate. 
C) transfer pricing will not affect the total tax liability, net of foreign tax credit offsets. 
D) none of the above 
A) it is beneficial to follow a high markup policy on transferred goods and services from the parent to a foreign affiliate. 
B) it is beneficial to follow a low markup policy on transferred goods and services from the parent to a foreign affiliate. 
C) transfer pricing will not affect the total tax liability, net of foreign tax credit offsets. 
D) none of the above

Question 18

Assume that a product has the following three stages of production:   If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

Accepted Answer

A) € 64 
B) €120 
C) €465 
D) €225 
A) € 64 
B) €120 
C) €465 
D) €225

Question 19

A controlled foreign corporation (CFC)is

Accepted Answer

A) a foreign corporation established as an affiliate of a U.S.corporation for the purpose of "buying" from the U.S.corporation property for resale and use abroad. 
B) a foreign subsidiary that has more than 50 percent of its voting equity owned by U.S.shareholders. 
C) a separate domestic U.S.corporation actively engaged in business in a U.S.possession (Puerto Rico and the U.S.Virgin Islands). 
D) one that has no "overall limitation" as regards to its foreign tax credits. 
A) a foreign corporation established as an affiliate of a U.S.corporation for the purpose of "buying" from the U.S.corporation property for resale and use abroad. 
B) a foreign subsidiary that has more than 50 percent of its voting equity owned by U.S.shareholders. 
C) a separate domestic U.S.corporation actively engaged in business in a U.S.possession (Puerto Rico and the U.S.Virgin Islands). 
D) one that has no "overall limitation" as regards to its foreign tax credits.

Question 20

There are three basic types of taxation that national governments throughout the world use:

Accepted Answer

A) income tax, withholding tax, and value-added tax. 
B) property tax, wealth tax, death tax. 
C) import quotas, duties, and tariffs. 
D) tariffs, ad valorem taxes, and income taxes. 
A) income tax, withholding tax, and value-added tax. 
B) property tax, wealth tax, death tax. 
C) import quotas, duties, and tariffs. 
D) tariffs, ad valorem taxes, and income taxes.

Exam 21: International Tax Environment and Transfer Pricing

The term "capital-import neutrality" refers to

Assume that a product has the following three stages of production: If the value-added tax (VAT)rate is 25%,what would be the VAT over all stages of production?

In a growing economy,the VAT would raise prodigious amounts of money

The U.S.IRS allows transfer prices to be set using

The current U.S.marginal tax rate for domestic nonfinancial corporations is 35 percent.

As a general rule,

The higher the transfer price

Under the territorial method of declaring a national tax jurisdiction

An uncontrolled foreign corporation is

The organizational form of a MNC can affect the timing of a tax liability.This means

Using transfer prices "creativity" MNCs can

The worldwide method of declaring a national tax jurisdiction

As a rule,payments to and from foreign affiliates,

A withholding tax is

Fundamentally,there are two types of tax jurisdiction:

Assume that a product has the following three stages of production: If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

When the income tax rate in the host country is greater than the tax rate in the parent country,

Assume that a product has the following three stages of production: If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

A controlled foreign corporation (CFC)is

There are three basic types of taxation that national governments throughout the world use:

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

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