Question 1

The worldwide or residential method of declaring a national tax jurisdiction is to

Accepted Answer

A) tax national residents of the country on their worldwide income no matter in which country it is earned. 
B) tax all income earned within the country by any taxpayer, domestic or foreign. 
C) tax foreign residents of the country on their home-country income but not foreign-earned income. 
D) none of the above 
A) tax national residents of the country on their worldwide income no matter in which country it is earned. 
B) tax all income earned within the country by any taxpayer, domestic or foreign. 
C) tax foreign residents of the country on their home-country income but not foreign-earned income. 
D) none of the above

Question 2

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 3

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 4

Which statement is false?

Accepted Answer

A) Active income is defined as income that results from production by the firm or individual or from services that have been provided. 
B) Passive income includes dividends and interest income, and income from royalties, patents, or copyrights paid to the taxpayer. 
C) A withholding tax is a tax levied on passive income earned by an individual or corporation of one country within the tax jurisdiction of another country. 
D) The current marginal U.S. income tax rate is positioned towards the lower end of the rates assessed by the majority of other countries. 
A) Active income is defined as income that results from production by the firm or individual or from services that have been provided. 
B) Passive income includes dividends and interest income, and income from royalties, patents, or copyrights paid to the taxpayer. 
C) A withholding tax is a tax levied on passive income earned by an individual or corporation of one country within the tax jurisdiction of another country. 
D) The current marginal U.S. income tax rate is positioned towards the lower end of the rates assessed by the majority of other countries.

Question 5

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 6

The current marginal U.S. income tax rate is positioned

Accepted Answer

A) pretty well in the middle of the rates assessed by the majority of other countries. 
B) towards the upper end of the rates assessed by the majority of other countries. 
C) towards the lower end of the rates assessed by the majority of other countries. 
A) pretty well in the middle of the rates assessed by the majority of other countries. 
B) towards the upper end of the rates assessed by the majority of other countries. 
C) towards the lower end of the rates assessed by the majority of other countries.

Question 7

Suppose a U.S.-based MNC makes computers with parts from its subsidiary in a low-tax East Asian country. It can reduce its reported U.S. income-and increase its subsidiary's profits-by

Accepted Answer

A) overpaying for the computer components. 
B) underpaying for the computer components. 
C) paying an arm's length price. 
D) none of the above 
A) overpaying for the computer components. 
B) underpaying for the computer components. 
C) paying an arm's length price. 
D) none of the above

Question 8

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 9

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 10

The idea that the tax burden a host country imposes on the foreign subsidiary of a MNC should be the same regardless of the country in which the MNC is incorporated and the same as that placed on domestic firms 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 11

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 12

In the United States foreign-source income is taxed at the same rate as U.S.-earned income and a foreign tax credit is given against taxes paid to a foreign government. However,

Accepted Answer

A) the foreign tax credit is limited to the amount of tax that would be due on that income if it were earned in the United States. 
B) if the tax rate paid on foreign-source income is greater than the U.S. tax rate, part of the credit may go unused. 
C) both of the above are true statements. 
D) none of the above is true 
A) the foreign tax credit is limited to the amount of tax that would be due on that income if it were earned in the United States. 
B) if the tax rate paid on foreign-source income is greater than the U.S. tax rate, part of the credit may go unused. 
C) both of the above are true statements. 
D) none of the above is true

Question 13

Value-added tax (VAT) is

Accepted Answer

A) a direct national tax levied on the value added in the production of a good (or service) as it moves through various stages of production. 
B) an indirect national tax levied on the value added in the production of a good (or service) as it moves through various stages of production. 
C) the equivalent of imposing a national sales tax. 
D) both b and c 
A) a direct national tax levied on the value added in the production of a good (or service) as it moves through various stages of production. 
B) an indirect national tax levied on the value added in the production of a good (or service) as it moves through various stages of production. 
C) the equivalent of imposing a national sales tax. 
D) both b and c

Question 14

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 15

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 16

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 PriceWaterhouseCoopers 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 PriceWaterhouseCoopers 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 17

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 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

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

The worldwide or residential method of declaring a national tax jurisdiction is to

Transfer pricing can have an effect on share value

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?

Which statement is false?

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

The current marginal U.S. income tax rate is positioned

Suppose a U.S.-based MNC makes computers with parts from its subsidiary in a low-tax East Asian country. It can reduce its reported U.S. income-and increase its subsidiary's profits-by

Withholding tax rates imposed through tax treaties are

A withholding tax

The idea that the tax burden a host country imposes on the foreign subsidiary of a MNC should be the same regardless of the country in which the MNC is incorporated and the same as that placed on domestic firms is earned is referred to as

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

In the United States foreign-source income is taxed at the same rate as U.S.-earned income and a foreign tax credit is given against taxes paid to a foreign government. However,

Value-added tax (VAT) is

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?

In general the United States claims

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

Tax neutrality is determined

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

The worldwide or residential method of declaring a national tax jurisdiction is to

Transfer pricing can have an effect on share value

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?

Which statement is false?

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

The current marginal U.S. income tax rate is positioned

Suppose a U.S.-based MNC makes computers with parts from its subsidiary in a low-tax East Asian country. It can reduce its reported U.S. income-and increase its subsidiary's profits-by

Withholding tax rates imposed through tax treaties are

A withholding tax

The idea that the tax burden a host country imposes on the foreign subsidiary of a MNC should be the same regardless of the country in which the MNC is incorporated and the same as that placed on domestic firms is earned is referred to as

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

In the United States foreign-source income is taxed at the same rate as U.S.-earned income and a foreign tax credit is given against taxes paid to a foreign government. However,

Value-added tax (VAT) is

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?

In general the United States claims

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

Tax neutrality is determined

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