Question 1

Tax neutrality

Accepted Answer

A) has its foundations in the principles of economic efficiency and equity. 
B) can be a difficult principle to apply in practice. 
C) is determined by three criteria: capital export neutrality, capital import neutrality and national neutrality. 
D) all of the above 
A) has its foundations in the principles of economic efficiency and equity. 
B) can be a difficult principle to apply in practice. 
C) is determined by three criteria: capital export neutrality, capital import neutrality and national neutrality. 
D) all of the above

Question 2

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 3

The territorial method of declaring a national tax jurisdiction is to

Accepted Answer

A) tax all income earned within the country by any taxpayer, domestic or foreign. 
B) tax national residents of the country on their worldwide income no matter in which country it is earned. 
C) also known as the residential method. 
D) none of the above 
A) tax all income earned within the country by any taxpayer, domestic or foreign. 
B) tax national residents of the country on their worldwide income no matter in which country it is earned. 
C) also known as the residential method. 
D) none of the above

Question 4

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 5

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 6

A withholding tax

Accepted Answer

A) is borne by a taxpayer who did not directly generate the income that serves as the source of the passive income. 
B) a direct tax on workers. 
C) assures the local tax authority that it will receive the tax due on the passive income earned within its tax jurisdiction. 
D) both a and c 
A) is borne by a taxpayer who did not directly generate the income that serves as the source of the passive income. 
B) a direct tax on workers. 
C) assures the local tax authority that it will receive the tax due on the passive income earned within its tax jurisdiction. 
D) both a and c

Question 7

Active income

Accepted Answer

A) income that results from production by the firm or individual (of goods or services). 
B) is income earned by professional athletes. 
C) includes dividend and interest income, since the tax court has ruled that taking risk is a form of work. 
D) none of the above. 
A) income that results from production by the firm or individual (of goods or services). 
B) is income earned by professional athletes. 
C) includes dividend and interest income, since the tax court has ruled that taking risk is a form of work. 
D) none of the above.

Question 8

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 9

Assume that a product has the following three stages of production: $$\begin{array} { c c } 
\text { Production } & \text { Selling } \
\text { Stage } & \text { Price } \
\hline 1 & € 100 \
2 & € 250 \
3 & € 750
\end{array}$$ 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 10

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 11

Capital export 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 12

The three basic types of taxation are

Accepted Answer

A) income tax, withholding tax, and value-added tax. 
B) income tax, withholding tax, business tax. 
C) withholding tax, value-added tax, corporate tax. 
D) personal tax, corporate tax, and operating tax. 
A) income tax, withholding tax, and value-added tax. 
B) income tax, withholding tax, business tax. 
C) withholding tax, value-added tax, corporate tax. 
D) personal tax, corporate tax, and operating tax.

Question 13

In a given year,the U.S.IRS places an overall limitation applied to foreign tax credits.

Accepted Answer

A) The maximum tax credit is figured on world-wide foreign-source income; losses in one country can offset profits in another. 
B) The maximum tax credit is figured on foreign-source income in each country; losses in one country cannot offset profits in another. 
C) The overall limitation is limited to the amount of tax that would be due on the foreign-source income if it had been earned in the United States. 
D) Both a and c 
A) The maximum tax credit is figured on world-wide foreign-source income; losses in one country can offset profits in another. 
B) The maximum tax credit is figured on foreign-source income in each country; losses in one country cannot offset profits in another. 
C) The overall limitation is limited to the amount of tax that would be due on the foreign-source income if it had been earned in the United States. 
D) Both a and c

Question 14

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 15

There are three production stages required before a bicycle produced by Masi Bicicletia S.A.can be sold at retail for €4,500.The VAT rate is 15%.Find the total tax liability due. $\begin{array}{crc}
\text { Production stage } & \text { Selling price } & \text { Value Added }& \text { Incremental VAT  }  \
1 & € 1,000 & \
2 & € 2,750 \
3 & € 4,500
\end{array}$

Accepted Answer

A) €525 
B) €675 
C) €3,500 
D) None of the above 
A) €525 
B) €675 
C) €3,500 
D) None of the above

Question 16

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 17

An income tax is a direct tax

Accepted Answer

A) True 
 B)False

Question 18

Assume that a product has the following three stages of production: $$\begin{array} { c l } 
\begin{array} { c } 
\text { Production } \
\text { Stage }
\end{array} & \begin{array} { c } 
\text { Selling } \
\text { Price }
\end{array} \
\hline 1 & € 80 \
2 & € 160 \
3 & € 360
\end{array}$$ 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 19

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.

Question 20

Assume that a product has the following three stages of production: $$\begin{array} { c l } 
\text { Production } & \text { Selling } \
\text { Stage } & \text { Price } \
\hline 1 & € 100 \
2 & € 250 \
3 & € 1,500
\end{array}$$ 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) €225 
A) € 90 
B) €120 
C) €465 
D) €225

Exam 21: International Tax Environment and Transfer Pricing

Tax neutrality

As a rule,payments to and from foreign affiliates,

The territorial method of declaring a national tax jurisdiction is to

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

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

A withholding tax

Active income

As a general rule,

Assume that a product has the following three stages of production: Production Selling Stage Price 1 100 2 250 3 750 If the value-added tax (VAT)rate is 25%,what would be the VAT over all stages of production?

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.

Capital export neutrality

The three basic types of taxation are

In a given year,the U.S.IRS places an overall limitation applied to foreign tax credits.

Under the territorial method of declaring a national tax jurisdiction

There are three production stages required before a bicycle produced by Masi Bicicletia S.A.can be sold at retail for €4,500.The VAT rate is 15%.Find the total tax liability due. Production stage Selling price Value Added Incremental VAT 1 1,000 2 2,750 3 4,500

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

An income tax is a direct tax

Assume that a product has the following three stages of production: Production Stage Selling Price 1 80 2 160 3 360 If the value-added tax (VAT)rate is 10%,what would be the VAT over all stages of production?

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

Assume that a product has the following three stages of production: Production Selling Stage Price 1 100 2 250 3 1,500 If the value-added tax (VAT)rate is 15%,what would be the VAT over all stages of production?

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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