Question 1

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 C

Question 2

One case of inversion is when a U.S.company is merged with a large foreign firm and the new combined entity is incorporated in the foreign country.The added stipulation to be a valid inversion is that the previous U.S.ownership must have a position of less than 80% ownership in the new combined entity.

Accepted Answer

A) True 
 B)False  False

Question 3

What are the desired characteristics for a country if it expects to be used as a tax haven?

Accepted Answer

Tax-haven subsidiaries are typically established in a country that can meet the following requirements: 1)A low tax on foreign investment or sales income earned by resident corporations and a low dividend withholding tax on dividends paid to the parent firm.2)A stable currency to permit easy conversion of funds into and out of the local currency.3)The facilities to support financial services: good communications,professional qualified office workers,and reputable banking services.4)A stable government that encourages the establishment of foreign-owned financial and service facilities within its borders.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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 8

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:

Accepted Answer

A)  $10,000. 
B)  $26,250. 
C)  $35,000. 
D)  $51,250. 
A)  $10,000. 
B)  $26,250. 
C)  $35,000. 
D)  $51,250.

Question 9

Between 2006 - 2012,global corporate tax rates have trended upward.

Accepted Answer

A) True 
 B)False

Question 10

________ 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 11

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 12

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 13

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.What is the minimum effective tax rate that BayArea can achieve on its foreign-sourced income?

Accepted Answer

A)  26% 
B)  35% 
C)  40% 
D)  0% 
A)  26% 
B)  35% 
C)  40% 
D)  0%

Question 14

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).

Accepted Answer

A) True 
 B)False

Question 15

If a U.S.multinational remits profits from two different countries (subsidiaries)back to the parent company (U.S.),the excess foreign tax credit from one subsidiary can only be cross-credited against another subsidiary from the same country.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  lower property taxes for U.S. citizens overseas 
B)  elimination of differential tax rates 
C)  increased double taxation 
D)  reduced withholding tax rates 
A)  lower property taxes for U.S. citizens overseas 
B)  elimination of differential tax rates 
C)  increased double taxation 
D)  reduced withholding tax rates

Question 17

Maximizing local profits in joint ventures overseas could be suboptimal from the overall view of the MNE.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  source 
B)  ethical 
C)  greedy 
D)  location 
A)  source 
B)  ethical 
C)  greedy 
D)  location

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

What are the desired characteristics for a country if it expects to be used as a tax haven?

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

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.

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

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

Between 2006 - 2012,global corporate tax rates have trended upward.

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

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

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).

If a U.S.multinational remits profits from two different countries (subsidiaries)back to the parent company (U.S.),the excess foreign tax credit from one subsidiary can only be cross-credited against another subsidiary from the same country.

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

Maximizing local profits in joint ventures overseas could be suboptimal from the overall view of the MNE.

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

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

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

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 15: Multinational Tax Management

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

What are the desired characteristics for a country if it expects to be used as a tax haven?

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

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.

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

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

Between 2006 - 2012,global corporate tax rates have trended upward.

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

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

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).

If a U.S.multinational remits profits from two different countries (subsidiaries)back to the parent company (U.S.),the excess foreign tax credit from one subsidiary can only be cross-credited against another subsidiary from the same country.

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

Maximizing local profits in joint ventures overseas could be suboptimal from the overall view of the MNE.

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

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

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

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

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

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