Question 1

A direct foreign tax credit is

Accepted Answer

A) computed for direct taxes paid on active foreign-source income of a foreign branch of a U.S.MNC. 
B) computed on the indirect withholding taxes withheld form passive income distributed by the foreign subsidiary to the U.S.parent. 
C) computed for income taxes deemed paid by the subsidiary. 
D) both a and b 
A) computed for direct taxes paid on active foreign-source income of a foreign branch of a U.S.MNC. 
B) computed on the indirect withholding taxes withheld form passive income distributed by the foreign subsidiary to the U.S.parent. 
C) computed for income taxes deemed paid by the subsidiary. 
D) both a and b

Question 2

Transfer pricing can have an effect on how divisions of a MNC are perceived by the local banks.Which transfer price would leave a local affiliate that imports components from the parent with less impressive financial statements?

Accepted Answer

A) High transfer price 
B) Low transfer price 
C) None of the above 
A) High transfer price 
B) Low transfer price 
C) None of the above

Question 3

Assume that a product has the following three stages of production: $$\begin{array}{l}
\text { Production Selling }\
\begin{array} { c l } 
\text { Stage } & \text { Price } \
\hline 1 & € 800 \
2 & € 960 \
3 & € 15,000
\end{array}
\end{array}$$ 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 4

In general the United States claims

Accepted Answer

A) only a limited taxing jurisdiction over nonresident alien individuals and foreign corporations. 
B) unlimited taxing jurisdiction over nonresident alien individuals and foreign corporations. 
C) unlimited taxing jurisdiction over resident alien individuals and foreign corporations. 
D) none of the above 
A) only a limited taxing jurisdiction over nonresident alien individuals and foreign corporations. 
B) unlimited taxing jurisdiction over nonresident alien individuals and foreign corporations. 
C) unlimited taxing jurisdiction over resident alien individuals and foreign corporations. 
D) none of the above

Question 5

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: U.S. tax rate $= 35 \%$
Foreign tax rate $= 39 \%$
Withholding tax rate $= 5 \%$

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 6

Tax evasion is more difficult under a VAT because

Accepted Answer

A) at each stage in the production process producers have an incentive to obtain documentation from the previous stage that the VAT was paid in order to get the greatest tax credit possible. 
B) customers can't convince retailers to sell things without a receipt. 
C) the cost of record keeping under a VAT system imposes an economic hardship on small businesses. 
D) none of the above 
A) at each stage in the production process producers have an incentive to obtain documentation from the previous stage that the VAT was paid in order to get the greatest tax credit possible. 
B) customers can't convince retailers to sell things without a receipt. 
C) the cost of record keeping under a VAT system imposes an economic hardship on small businesses. 
D) none of the above

Question 7

With a MNC

Accepted Answer

A) the decision to set a transfer price is further complicated by import duty considerations. 
B) the decision to set a transfer price can be further complicated by exchange rate restrictions imposed by governments. 
C) the decision to set a transfer price is further complicated by tax considerations, if there is a difference in tax rates between the host country and the home country. 
D) all of the above 
A) the decision to set a transfer price is further complicated by import duty considerations. 
B) the decision to set a transfer price can be further complicated by exchange rate restrictions imposed by governments. 
C) the decision to set a transfer price is further complicated by tax considerations, if there is a difference in tax rates between the host country and the home country. 
D) all of the above

Question 8

Assume that a product has the following three stages of production: $$\begin{array} { c c } 
\text { Production } & \text { Selling } \
\text { Stage } & \text { Price } \
\hline 1 & € 1,000 \
2 & € 2,000 \
3 & € 3,000
\end{array}$$ If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

Accepted Answer

A) €150 
B) €600 
C) €150.0 
D) €225 
A) €150 
B) €600 
C) €150.0 
D) €225

Question 9

An overseas affiliate of a U.S.MNC can be organized

Accepted Answer

A) as a branch. 
B) as a subsidiary. 
C) both a and b 
D) none of the above 
A) as a branch. 
B) as a subsidiary. 
C) both a and b 
D) none of the above

Question 10

Tax equity means that

Accepted Answer

A) similarly situated taxpayers should participate in the cost of operating the government according to the same rules. 
B) regardless of the country in which an affiliate of a MNC earns taxable income, the same tax rate and tax due date apply. 
C) a dollar earned by a foreign affiliate is taxed under the same rules as a dollar earned by a domestic affiliate of the MNC. 
D) all of the above 
A) similarly situated taxpayers should participate in the cost of operating the government according to the same rules. 
B) regardless of the country in which an affiliate of a MNC earns taxable income, the same tax rate and tax due date apply. 
C) a dollar earned by a foreign affiliate is taxed under the same rules as a dollar earned by a domestic affiliate of the MNC. 
D) all of the above

Question 11

A withholding tax is

Accepted Answer

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

Question 12

Assume that a product has the following three stages of production: $$\begin{array} { c l } 
\text { Production } & \text { Selling } \
\text { Stage } & \text { Price } \
\hline 1 & € 600 \
2 & € 1,400 \
3 & € 1,700
\end{array}$$ If the value-added tax (VAT)rate is 15%,what would be the VAT over all stages of production?

Accepted Answer

A) € 90 
B) €120 
C) €465 
D) €255 
A) € 90 
B) €120 
C) €465 
D) €255

Question 13

Tax neutrality is determined by three criteria: which of the following doesn't belong?

Accepted Answer

A) Capital-export neutrality 
B) Capital-import neutrality 
C) National neutrality 
D) Income neutrality 
A) Capital-export neutrality 
B) Capital-import neutrality 
C) National neutrality 
D) Income neutrality

Question 14

Tax neutrality is determined

Accepted Answer

A) by one criterion. 
B) by two criteria. 
C) by three criteria. 
D) by four criteria. 
A) by one criterion. 
B) by two criteria. 
C) by three criteria. 
D) by four criteria.

Question 15

Assume that a product has the following three stages of production: $$\begin{array} { c l } 
\text { Production } & \text { Selling } \
\text { Stage } & \text { Price } \
\hline 1 & € 80 \
2 & € 160 \
3 & € 320
\end{array}$$ 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 16

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 17

The typical approach to avoiding double taxation is

Accepted Answer

A) for a nation to grant the parent firm credit against its domestic tax liability for taxes paid to foreign tax authorities on foreign-source income. 
B) for a nation not to tax foreign-source income of its national residents. 
C) for a company to use both worldwide and the territorial methods. 
D) none of the above 
A) for a nation to grant the parent firm credit against its domestic tax liability for taxes paid to foreign tax authorities on foreign-source income. 
B) for a nation not to tax foreign-source income of its national residents. 
C) for a company to use both worldwide and the territorial methods. 
D) none of the above

Question 18

Which of the following are true?

Accepted Answer

A) A VAT fosters national saving. 
B) An income tax is a disincentive to save because the returns from savings are taxed. 
C) National tax authorities find that a VAT is easier to collect than an income tax because tax evasion is more difficult. 
D) All of the above are true 
A) A VAT fosters national saving. 
B) An income tax is a disincentive to save because the returns from savings are taxed. 
C) National tax authorities find that a VAT is easier to collect than an income tax because tax evasion is more difficult. 
D) All of the above are true

Question 19

You are a U.S.MNC with a 40 percent U.S.tax rate.You have an Irish subsidiary.The corporate income tax there is 12½%.For every $10,000,000 of income the subsidiary reports,you will owe taxes to the U.S.Treasury in the amount of

Accepted Answer

A) $4,000,000. 
B) $1,250,000. 
C) $2,750,000. 
D) None of the above 
A) $4,000,000. 
B) $1,250,000. 
C) $2,750,000. 
D) None of the above

Question 20

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

A direct foreign tax credit is

Transfer pricing can have an effect on how divisions of a MNC are perceived by the local banks.Which transfer price would leave a local affiliate that imports components from the parent with less impressive financial statements?

Assume that a product has the following three stages of production: Production Selling Stage Price 1 800 2 960 3 15,000 If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

In general the United States claims

Tax evasion is more difficult under a VAT because

With a MNC

Assume that a product has the following three stages of production: Production Selling Stage Price 1 1,000 2 2,000 3 3,000 If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

An overseas affiliate of a U.S.MNC can be organized

Tax equity means that

A withholding tax is

Assume that a product has the following three stages of production: Production Selling Stage Price 1 600 2 1,400 3 1,700 If the value-added tax (VAT)rate is 15%,what would be the VAT over all stages of production?

Tax neutrality is determined by three criteria: which of the following doesn't belong?

Tax neutrality is determined

Assume that a product has the following three stages of production: Production Selling Stage Price 1 80 2 160 3 320 If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

The higher the transfer price

The typical approach to avoiding double taxation is

Which of the following are true?

You are a U.S.MNC with a 40 percent U.S.tax rate.You have an Irish subsidiary.The corporate income tax there is 12½%.For every $10,000,000 of income the subsidiary reports,you will owe taxes to the U.S.Treasury in the amount of

The lower the transfer price

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

A direct foreign tax credit is

Transfer pricing can have an effect on how divisions of a MNC are perceived by the local banks.Which transfer price would leave a local affiliate that imports components from the parent with less impressive financial statements?

Assume that a product has the following three stages of production: Production Selling Stage Price 1 800 2 960 3 15,000 If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

In general the United States claims

Tax evasion is more difficult under a VAT because

With a MNC

Assume that a product has the following three stages of production: Production Selling Stage Price 1 1,000 2 2,000 3 3,000 If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

An overseas affiliate of a U.S.MNC can be organized

Tax equity means that

A withholding tax is

Assume that a product has the following three stages of production: Production Selling Stage Price 1 600 2 1,400 3 1,700 If the value-added tax (VAT)rate is 15%,what would be the VAT over all stages of production?

Tax neutrality is determined by three criteria: which of the following doesn't belong?

Tax neutrality is determined

Assume that a product has the following three stages of production: Production Selling Stage Price 1 80 2 160 3 320 If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

The higher the transfer price

The typical approach to avoiding double taxation is

Which of the following are true?

You are a U.S.MNC with a 40 percent U.S.tax rate.You have an Irish subsidiary.The corporate income tax there is 12½%.For every $10,000,000 of income the subsidiary reports,you will owe taxes to the U.S.Treasury in the amount of

The lower the transfer price

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