Question 1

The two main objectives of taxation are

Accepted Answer

A) tax neutrality and tax equity. 
B) complexity and revenue. 
C) social engineering and tax equity. 
D) progressive taxation and tax neutrality. 
A) tax neutrality and tax equity. 
B) complexity and revenue. 
C) social engineering and tax equity. 
D) progressive taxation and tax neutrality.

Question 2

A value-added tax (VAT)is __________ national tax levied on the value added in the production of a good (or service)as it moves through the various stages of production.

Accepted Answer

A) a direct 
B) an indirect 
C) a sales tax 
D) none of the above 
A) a direct 
B) an indirect 
C) a sales tax 
D) none of the above

Question 3

Transfer pricing can have an effect on share value

Accepted Answer

A) to the extent that financial markets are inefficient. 
B) to the extent that security analysts do not understand the transfer pricing strategy being used. 
C) to the extent that third parties benefit from the transfer price. 
D) both a) and b) 
A) to the extent that financial markets are inefficient. 
B) to the extent that security analysts do not understand the transfer pricing strategy being used. 
C) to the extent that third parties benefit from the transfer price. 
D) both a) and b)

Question 4

Suppose a U.S.-based MNC makes bicycles with parts from its subsidiary in a low-tax East Asian country.The bicycle frames are made here,the component parts (cranksets,wheels,and so on)are made abroad,the bicycles are assembled in Japan and reimported to the U.S.It can reduce its reported U.S.income-and increase its subsidiary's profits-by

Accepted Answer

A) overcharging its subsidiaries for the U.S.-made frames. 
B) undercharging its subsidiaries for the U.S.-made frames. 
C) assembling the bicycles in the U.S. 
D) none of the above 
A) overcharging its subsidiaries for the U.S.-made frames. 
B) undercharging its subsidiaries for the U.S.-made frames. 
C) assembling the bicycles in the U.S. 
D) none of the above

Question 5

For a parent that sells goods to a subsidiary,transfer pricing can have an effect on international capital expenditure analysis.A very low markup policy makes the APV of a subsidiary's capital expenditure appear

Accepted Answer

A) more attractive. 
B) less attractive. 
C) no impact. 
A) more attractive. 
B) less attractive. 
C) no impact.

Question 6

If a dollar earned by a foreign affiliate is taxed under the same rules as a dollar earned by a domestic affiliate of the MNC,then we have achieved

Accepted Answer

A) capital-export neutrality. 
B) capital-import neutrality. 
C) national neutrality. 
D) tax equity. 
A) capital-export neutrality. 
B) capital-import neutrality. 
C) national neutrality. 
D) tax equity.

Question 7

Capital import neutrality

Accepted Answer

A) is the criterion that an ideal tax should be effective in raising revenue of the government and not have any negative effects on the economic decision-making process of the taxpayer. 
B) requires 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) implies that the tax burden a host country imposes on the foreign subsidiary of the MNC should be the same regardless of which country the MNC is incorporated and the same as that placed on domestic firms. 
D) none of the above 
A) is the criterion that an ideal tax should be effective in raising revenue of the government and not have any negative effects on the economic decision-making process of the taxpayer. 
B) requires 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) implies that the tax burden a host country imposes on the foreign subsidiary of the MNC should be the same regardless of which country the MNC is incorporated and the same as that placed on domestic firms. 
D) none of the above

Question 8

A "tax haven" country is one that has a low,or zero percent,national tax rates.Some of the countries that fall into this category are

Accepted Answer

A) Bahamas, Bahrain, Bermuda, and the Cayman Islands. 
B) Denmark, Norway, Switzerland, and Sweden. 
C) Bulgaria, Canada, Saudi Arabia, and South Africa. 
D) Congo, Egypt, Kuwait, and Zaire. 
A) Bahamas, Bahrain, Bermuda, and the Cayman Islands. 
B) Denmark, Norway, Switzerland, and Sweden. 
C) Bulgaria, Canada, Saudi Arabia, and South Africa. 
D) Congo, Egypt, Kuwait, and Zaire.

Question 9

National neutrality

Accepted Answer

A) is the criterion that an ideal tax should be effective in raising revenue of the government and not have any negative effects on the economic decision-making process of the taxpayer. 
B) requires 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) implies that the tax burden a host country imposes on the foreign subsidiary of the MNC should be the same regardless of which country the MNC is incorporated and the same as that placed on domestic firms. 
D) none of the above 
A) is the criterion that an ideal tax should be effective in raising revenue of the government and not have any negative effects on the economic decision-making process of the taxpayer. 
B) requires 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) implies that the tax burden a host country imposes on the foreign subsidiary of the MNC should be the same regardless of which country the MNC is incorporated and the same as that placed on domestic firms. 
D) none of the above

Question 10

The United States withholds ___________ percent of passive income from taxpayers that reside in countries with which it does not have withholding tax treaties.

Accepted Answer

A) 10 
B) 20 
C) 30 
D) 40 
E) 50 
A) 10 
B) 20 
C) 30 
D) 40 
E) 50

Question 11

Assume that a product has the following three stages of production:   If the value-added tax (VAT)rate is 10%,what would be the VAT over all stages of production?

Accepted Answer

A) €64 
B) €36 
C) €465 
D) €225 
A) €64 
B) €36 
C) €465 
D) €225

Question 12

The idea 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 is referred to as

Accepted Answer

A) capital-export neutrality. 
B) capital-import neutrality. 
C) national neutrality. 
D) none of the above 
A) capital-export neutrality. 
B) capital-import neutrality. 
C) national neutrality. 
D) none of the above

Question 13

Withholding tax rates imposed through tax treaties are

Accepted Answer

A) bilateral. 
B) multilateral. 
C) netted. 
D) none of the above 
A) bilateral. 
B) multilateral. 
C) netted. 
D) none of the above

Question 14

When excess tax credits go unused,the foreign tax liability for a branch is greater than the corresponding U.S.tax liability when the foreign income tax rate is greater than the U.S.rate.Calculate the total tax liability for a wholly-owned subsidiary when excess tax credits cannot be used in a country given:

Accepted Answer

A) 44.00% 
B) 35.00% 
C) 43.36% 
D) 42.05% 
A) 44.00% 
B) 35.00% 
C) 43.36% 
D) 42.05%

Question 15

A withholding tax is defined by your textbook as

Accepted Answer

A) the money that the government takes for every worker's paycheck. 
B) social security taxes. 
C) a tax levied on income earned by an individual (or corporation) of one country within the tax jurisdiction of another county. 
D) a tax levied on passive income earned by an individual (or corporation) of one country within the tax jurisdiction of another county. 
A) the money that the government takes for every worker's paycheck. 
B) social security taxes. 
C) a tax levied on income earned by an individual (or corporation) of one country within the tax jurisdiction of another county. 
D) a tax levied on passive income earned by an individual (or corporation) of one country within the tax jurisdiction of another county.

Question 16

Countries differ in how they tax foreign-source income of their domestic MNCs.

Accepted Answer

A) Therefore, different forms of structuring a multinational organization within a country can result in different tax liabilities for the firm. 
B) However, due to tax treaties and foreign tax credits, this is not an issue for a U.S.-based MNC. 
C) But all countries tax domestic income of their domestic MNCs in the same way. 
D) All of the above 
A) Therefore, different forms of structuring a multinational organization within a country can result in different tax liabilities for the firm. 
B) However, due to tax treaties and foreign tax credits, this is not an issue for a U.S.-based MNC. 
C) But all countries tax domestic income of their domestic MNCs in the same way. 
D) All of the above

Question 17

The idea that an ideal tax should be effective in raising revenue for the government but not have any negative effects on the economic decision-making process of the taxpayer is referred to as

Accepted Answer

A) capital-export neutrality. 
B) capital-import neutrality. 
C) national neutrality. 
D) none of the above 
A) capital-export neutrality. 
B) capital-import neutrality. 
C) national neutrality. 
D) none of the above

Question 18

The U.S.IRS allows transfer prices to be set using the arms-length price.

Accepted Answer

A) This is a very straight-forward method to use in practice-just use the eBay price. 
B) This method is difficult to apply in practice because many factors enter into the pricing of goods and services.Examples include: differences in the terms of sale, differences in quantity and or quality sold, even differences in location or date of sale. 
C) All of the above 
D) None of the above 
A) This is a very straight-forward method to use in practice-just use the eBay price. 
B) This method is difficult to apply in practice because many factors enter into the pricing of goods and services.Examples include: differences in the terms of sale, differences in quantity and or quality sold, even differences in location or date of sale. 
C) All of the above 
D) None of the above

Question 19

The lower the transfer price

Accepted Answer

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

Question 20

These days the benefits of "tax haven" subsidiaries have been reduced by

Accepted Answer

A) the present corporate income tax rate in the United States is not especially high in comparison to most non-tax haven countries. 
B) the rules governing controlled foreign corporations have effectively eliminated the ability to defer passive income in a tax haven subsidiary. 
C) all of the above 
D) none of the above 
A) the present corporate income tax rate in the United States is not especially high in comparison to most non-tax haven countries. 
B) the rules governing controlled foreign corporations have effectively eliminated the ability to defer passive income in a tax haven subsidiary. 
C) all of the above 
D) none of the above

The two main objectives of taxation are

A value-added tax (VAT)is __________ national tax levied on the value added in the production of a good (or service)as it moves through the various stages of production.

Transfer pricing can have an effect on share value

For a parent that sells goods to a subsidiary,transfer pricing can have an effect on international capital expenditure analysis.A very low markup policy makes the APV of a subsidiary's capital expenditure appear

If a dollar earned by a foreign affiliate is taxed under the same rules as a dollar earned by a domestic affiliate of the MNC,then we have achieved

Capital import neutrality

A "tax haven" country is one that has a low,or zero percent,national tax rates.Some of the countries that fall into this category are

National neutrality

The United States withholds ___________ percent of passive income from taxpayers that reside in countries with which it does not have withholding tax treaties.

Assume that a product has the following three stages of production: If the value-added tax (VAT)rate is 10%,what would be the VAT over all stages of production?

The idea 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 is referred to as

Withholding tax rates imposed through tax treaties are

A withholding tax is defined by your textbook as

Countries differ in how they tax foreign-source income of their domestic MNCs.

The idea that an ideal tax should be effective in raising revenue for the government but not have any negative effects on the economic decision-making process of the taxpayer is referred to as

The U.S.IRS allows transfer prices to be set using the arms-length price.

The lower the transfer price

These days the benefits of "tax haven" subsidiaries have been reduced by

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

Filters

Exam 21: International Tax Environment and Transfer Pricing

The two main objectives of taxation are

A value-added tax (VAT)is __________ national tax levied on the value added in the production of a good (or service)as it moves through the various stages of production.

Transfer pricing can have an effect on share value

For a parent that sells goods to a subsidiary,transfer pricing can have an effect on international capital expenditure analysis.A very low markup policy makes the APV of a subsidiary's capital expenditure appear

If a dollar earned by a foreign affiliate is taxed under the same rules as a dollar earned by a domestic affiliate of the MNC,then we have achieved

Capital import neutrality

A "tax haven" country is one that has a low,or zero percent,national tax rates.Some of the countries that fall into this category are

National neutrality

The United States withholds ___________ percent of passive income from taxpayers that reside in countries with which it does not have withholding tax treaties.

Assume that a product has the following three stages of production: If the value-added tax (VAT)rate is 10%,what would be the VAT over all stages of production?

The idea 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 is referred to as

Withholding tax rates imposed through tax treaties are

A withholding tax is defined by your textbook as

Countries differ in how they tax foreign-source income of their domestic MNCs.

The idea that an ideal tax should be effective in raising revenue for the government but not have any negative effects on the economic decision-making process of the taxpayer is referred to as

The U.S.IRS allows transfer prices to be set using the arms-length price.

The lower the transfer price

These days the benefits of "tax haven" subsidiaries have been reduced by

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

Filters