Question 1

Tax treaties generally have the effect of increasing the withholding taxes between the countries that are negotiating the treaties.

Accepted Answer

A) True 
 B)False

Question 2

A tax that is effectively a sales tax at each stage of production is defined as a/an ________ tax.

Accepted Answer

A) flat 
B) equitable 
C) value-added tax 
D) none of the above 
A) flat 
B) equitable 
C) value-added tax 
D) none of the above

Question 3

Which of the following is NOT an example of a tax incentive policy.

Accepted Answer

A) The federal government gives a tax credit to MNEs that make domestic capital improvements but not foreign capital improvements. 
B) Corporations are allowed to take a direct tax credit for each dollar of matching donations they make to institutions of higher education. 
C) A tax law is passed that makes interest on property non tax-deductible, but interest payments on durable goods are. 
D) All are examples of a tax incentive policy. 
A) The federal government gives a tax credit to MNEs that make domestic capital improvements but not foreign capital improvements. 
B) Corporations are allowed to take a direct tax credit for each dollar of matching donations they make to institutions of higher education. 
C) A tax law is passed that makes interest on property non tax-deductible, but interest payments on durable goods are. 
D) All are examples of a tax incentive policy.

Question 4

TABLE 20.1
Uses the information to answer following question(s).
MetroCity Designs Inc., located in Northern California, has two international subsidiaries, one located in the Ukraine, the other in Korea. Consider the information below to answer the next several questions.  
-Refer to Table 20.1. The additional U.S. taxes due on the repatriation of income from the Ukraine to the United States, alone, assuming a 50% payout rate, is

Accepted Answer

A) excess foreign tax credits of $110,000. 
B) additional U.S. taxes due of $97,000. 
C) additional U.S. taxes due of $36,500. 
D) excess foreign tax credits of $18,500. 
A) excess foreign tax credits of $110,000. 
B) additional U.S. taxes due of $97,000. 
C) additional U.S. taxes due of $36,500. 
D) excess foreign tax credits of $18,500.

Question 5

The primary objective of multinational tax planning is to minimize the firm's worldwide tax burden.

Accepted Answer

A) True 
 B)False

Question 6

TABLE 20.1
Uses the information to answer following question(s).
MetroCity Designs Inc., located in Northern California, has two international subsidiaries, one located in the Ukraine, the other in Korea. Consider the information below to answer the next several questions.  
-Refer to Table 20.1. How much in additional U.S. taxes would be due if MetroCity averaged the tax credits and liabilities of the two foreign units, assuming a 50% payout rate from each?

Accepted Answer

A) $3,750 
B) $13,750 
C) $2,500 
D) $0 
A) $3,750 
B) $13,750 
C) $2,500 
D) $0

Question 7

Which of the following is an unlikely objective of U.S. government policy for the taxation of foreign MNEs?

Accepted Answer

A) to raise revenues 
B) to provide an incentive for U.S. private investment in developing countries 
C) to improve the U.S. balance of payments 
D) All of the above are objectives. 
A) to raise revenues 
B) to provide an incentive for U.S. private investment in developing countries 
C) to improve the U.S. balance of payments 
D) All of the above are objectives.

Question 8

Use the information to answer the following question(s).
Rogue River Exporters USA has $100,000 of before tax foreign income. The host country has a corporate income tax rate of 25% and the U.S. has a corporate income tax rate of 35%.
-Refer to Instruction 20.1. If the U.S. has a bilateral trade agreement with the host country that calls for the total tax paid to be equal to the maximum amount that could be paid in the highest taxing country, what is the total amount of income taxes Rogue River Exporters will pay to the host country, and how much will they pay in U.S income taxes on the foreign earned income?

Accepted Answer

A) $25,000; $10,000 
B) $25,000; $26,250 
C) $35,000; $0 
D) none of the above 
A) $25,000; $10,000 
B) $25,000; $26,250 
C) $35,000; $0 
D) none of the above

Question 9

A tax that is a form of social redistribution of income is defined as a/an ________ tax.

Accepted Answer

A) un-American 
B) transfer 
C) flat 
D) none of the above 
A) un-American 
B) transfer 
C) flat 
D) none of the above

Question 10

Transfer pricing is a strategy that may be used by MNEs to

Accepted Answer

A) reduce consolidated corporate income taxes. 
B) partially finance a subsidiary in another country. 
C) transfer funds from a subsidiary to the parent corporation. 
D) all of the above 
A) reduce consolidated corporate income taxes. 
B) partially finance a subsidiary in another country. 
C) transfer funds from a subsidiary to the parent corporation. 
D) all of the above

Question 11

Tax haven subsidiaries of MNEs are categorically referred to as international offshore financial centers.

Accepted Answer

A) True 
 B)False

Question 12

The issue of ethics in the reporting of income and the payment of taxes is a considerable one. The authors state that most MNEs operating in foreign countries tend to follow the general principle of

Accepted Answer

A) "when in Rome, do as the Romans do." 
B) full disclosure to the tax authorities. 
C) maintain a competitive playing field by cheating as much as the local competition, no more, no less. 
D) none of the above 
A) "when in Rome, do as the Romans do." 
B) full disclosure to the tax authorities. 
C) maintain a competitive playing field by cheating as much as the local competition, no more, no less. 
D) none of the above

Question 13

A ________ tax policy is one that has no impact on private decision-making, while a ________ policy is designed to encourage specific behavior.

Accepted Answer

A) flat; tax incentive 
B) neutral; flat 
C) neutral; tax incentive 
D) none of the above 
A) flat; tax incentive 
B) neutral; flat 
C) neutral; tax incentive 
D) none of the above

Question 14

________ is the pricing of goods, services, and technology between related companies.

Accepted Answer

A) Among pricing 
B) Retail pricing 
C) Transfer pricing 
D) Wholesale pricing 
A) Among pricing 
B) Retail pricing 
C) Transfer pricing 
D) Wholesale pricing

Question 15

What is the total value of taxes paid in the following example if the value added tax is 10%? A farmer raises wheat that he sells for $1.50 to the grain company. The grain company sells to the processor for $2.00 per bushel. The processor turns the wheat into a breakfast cereal and wholesales it for $3.00 per bushel. The retailer sells the cereal for $4.00 per bushel.

Accepted Answer

A) $0.15 
B) $0.20 
C) $0.30 
D) $0.40 
A) $0.15 
B) $0.20 
C) $0.30 
D) $0.40

Question 16

TABLE 20.1
Uses the information to answer following question(s).
MetroCity Designs Inc., located in Northern California, has two international subsidiaries, one located in the Ukraine, the other in Korea. Consider the information below to answer the next several questions.  
-Refer to Table 20.1. If MetroCity set the payout rate from the Ukraine subsidiary at 25%, how should MetroCity set the payout rate of the Korean subsidiary (approximately)to more efficiently manage its total foreign tax bill?

Accepted Answer

A) 28.5% 
B) 24.5% 
C) 42.6% 
D) 82.3% 
A) 28.5% 
B) 24.5% 
C) 42.6% 
D) 82.3%

Question 17

A ________ is a direct reduction of taxes whereas a ________ reduces the taxable income before taxes.

Accepted Answer

A) foreign tax credit; domestic tax credit 
B) tax deduction; tax credit 
C) tax credit; tax deduction 
D) none of the above 
A) foreign tax credit; domestic tax credit 
B) tax deduction; tax credit 
C) tax credit; tax deduction 
D) none of the above

Question 18

A country CANNOT have both a territorial and a worldwide approach as a national tax policy.

Accepted Answer

A) True 
 B)False

Tax treaties generally have the effect of increasing the withholding taxes between the countries that are negotiating the treaties.

A tax that is effectively a sales tax at each stage of production is defined as a/an ________ tax.

Which of the following is NOT an example of a tax incentive policy.

The primary objective of multinational tax planning is to minimize the firm's worldwide tax burden.

Which of the following is an unlikely objective of U.S. government policy for the taxation of foreign MNEs?

A tax that is a form of social redistribution of income is defined as a/an ________ tax.

Transfer pricing is a strategy that may be used by MNEs to

Tax haven subsidiaries of MNEs are categorically referred to as international offshore financial centers.

The issue of ethics in the reporting of income and the payment of taxes is a considerable one. The authors state that most MNEs operating in foreign countries tend to follow the general principle of

A tax policy is one that has no impact on private decision-making, while a policy is designed to encourage specific behavior.

________ is the pricing of goods, services, and technology between related companies.

A is a direct reduction of taxes whereas a reduces the taxable income before taxes.

A country CANNOT have both a territorial and a worldwide approach as a national tax policy.

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007-2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives

Interest Rate and Currency Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Operating Exposure

Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity Globally

Sourcing Debt Globally

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Political Risk

Multinational Capital Budgeting

Working Capital Management

International Trade Finance

Filters

Exam 20: Multinational Tax Management

Tax treaties generally have the effect of increasing the withholding taxes between the countries that are negotiating the treaties.

A tax that is effectively a sales tax at each stage of production is defined as a/an ________ tax.

Which of the following is NOT an example of a tax incentive policy.

The primary objective of multinational tax planning is to minimize the firm's worldwide tax burden.

Which of the following is an unlikely objective of U.S. government policy for the taxation of foreign MNEs?

A tax that is a form of social redistribution of income is defined as a/an ________ tax.

Transfer pricing is a strategy that may be used by MNEs to

Tax haven subsidiaries of MNEs are categorically referred to as international offshore financial centers.

The issue of ethics in the reporting of income and the payment of taxes is a considerable one. The authors state that most MNEs operating in foreign countries tend to follow the general principle of

A ________ tax policy is one that has no impact on private decision-making, while a ________ policy is designed to encourage specific behavior.

________ is the pricing of goods, services, and technology between related companies.

A ________ is a direct reduction of taxes whereas a ________ reduces the taxable income before taxes.

A country CANNOT have both a territorial and a worldwide approach as a national tax policy.

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007-2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives

Interest Rate and Currency Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Operating Exposure

Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity Globally

Sourcing Debt Globally

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Political Risk

Multinational Capital Budgeting

Working Capital Management

International Trade Finance

Filters

A tax policy is one that has no impact on private decision-making, while a policy is designed to encourage specific behavior.

A is a direct reduction of taxes whereas a reduces the taxable income before taxes.