Exam 15: Multinational Tax Management

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

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

The territorial approach to taxation policy is also termed the ________ approach.

Use the information to answer the following question(s). Green Valley 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 15.1. If the U.S. has no bilateral trade agreement with the host country, what is the total amount of income taxes Green Valley Exporters will pay?

TABLE 15.1 Use the information to answer following question(s). BayArea 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 15.1. 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:

The territorial approach, also referred to as the source approach to tax policy, levies taxes on the income earned by firms that are incorporated in the host country, regardless of where the income was earned (domestically or abroad).

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

FEW governments rely on income taxes, both personal and corporate, for their primary revenue source.

A value-added tax has gained widespread usage in Western Europe, Canada, and parts of Latin America.

Tax treaties typically result in ________ between the two countries in question.

Use the information to answer the following question(s). Green Valley 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 15.1. If the U.S. treated the taxes paid on income earned in the host country as a tax-credit, then Green Valley's total U.S. corporate tax on the foreign earnings would be:

What is a value-added tax? Where is this type of tax in wide usage? Why do you suppose this form of taxation has NOT been widely accepted in the United States?

Tax treaties typically result in reduced withholding tax rates between the two signatory countries.

Tax credits are less valuable on a dollar-for-dollar basis than are tax-deductible expenses.

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:

The worldwide approach, also referred to as the residential or national approach to tax policy, levies taxes on the income earned by firms that are incorporated in the host country, regardless of where the income was earned (domestically or abroad).

Explain the worldwide and territorial approaches of national taxation. The authors state that the United States uses both approaches. How can this be? Give an example of each taxation approach.

Use the information to answer the following question(s). Green Valley 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 15.1. If the U.S. treated the taxes paid on income earned in the host country as a tax-deductible expense, then Green Valley's total U.S. corporate tax on the foreign earnings would be:

In the mid 1980s the U.S. led the way to higher corporate income tax rates worldwide. Today, most of the G7 nations have surpassed the U.S. and have higher corporate income tax rates than the U.S.

TABLE 15.1 Use the information to answer following question(s). BayArea 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 15.1. How much in additional U.S. taxes would be due if BayArea averaged the tax credits and liabilities of the two foreign units, assuming a 50% payout rate from each?