Seminar 3 MCQs Flashcards
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) Full Disclosure to the tax authorities.
B) Maintain a competitive playing field by cheating as much as the local competition, no more, no less.
C) “when in Rome, do as the Romans do”
D) None of the above.
Full disclosure to the tax authorities.
What is an unlikely objective of US government policy for the taxation of foreign MNEs?
A) To improve the US balance of payments.
B) To raise revenues.
C) To provide an incentive for US private investment in developing countries.
D) All of the above are objectives.
All are objectives.
A _________ tax policy is one that has no impact on private decision-making, while a _______ policy is designed to encourage specific behaviour.
A) Flat; tax incentive.
B) Neutral; tax incentive.
C) Neutral; flat tax.
D) None of the above.
Neutral; Tax incentive.
The US taxes the domestic and remitted foreign earnings of US-based MNEs no matter where the earnings occurred. This is an example of a/an ______ approach to levying taxes.
A) Neutral.
B) Territorial.
C) Worldwide.
D) Equitable.
Worldwide.
Bacon Signs Inc. is based in a country with a territorial approach to taxation but generates 100% of its income in a country with a worldwide approach to taxation. The tax rate in the country of incorporation is 25%, and the tax rate in the country where they earn income is 50%. In theory, and barring any special provisions in the tax codes of either country, Bacon should pay tax at a rate of ______ in the country of incorporation.
A) 50%
B) 62.5%
C) 0%
D) 75%
0%
A tax that is effectively a sales tax at each stage of production is defined as a/an _____ tax.
A) Value-added tax.
B) Flat.
C) Equitable.
D) None of the above.
Value-added tax.
Tax treaties typically result in ______ between the two countries in question.
A) Increased double taxation.
B) Elimination of differential tax rates.
C) Reduced withholding tax rates.
D) Lower property taxes for US citizens overseas.
Reduced withholding tax rates.
A _______ is a direct reduction of taxes whereas a ________ reduces the taxable income before taxes.
A) Tax credit; tax deduction.
B) Foreign tax credit; domestic tax credit.
C) Tax deduction; tax credit.
D) None of the above.
Tax credit; Tax deduction.
The changing global tax environment for multinational firms has been attributed to all of the following EXCEPT:
A) Increase cost of capital.
B) Rapid expansion of the global digital economy.
C) Aggressiveness of governments to increase their individual tax competitiveness.
D) All of the above.
Increase cost of capital.
The Act of 2017 has multiple provisions, the following are likely of the most significant to all US companies EXCEPT:
A) Limits the net interest deductions.
B) Allows companies to deduct the entire cost of equipment purchases from their taxable income.
C) US corporate income tax rate is reduced to 21%.
D) All of the above.
All of the above.
Which of the following is NOT true regarding the market for foreign exchange?
A) Foreign exchange transactions are physically completed in the foreign exchange market.
B) The rate of exchange is determined in the market.
C) The market provides the physical and institutional structure through which the money of one country is exchanged for another.
D) All of the above are true.
All are true.
The _______ is the mechanism by which participants transfer purchasing power between countries, obtain or provide credit for international trade transactions, and minimise exposure to the risks of exchange rate changes.
A) LIBOR.
B) Foreign exchange market.
C) Federal open market.
D) Futures market.
Foreign exchange market.
Which of the following is NOT a motivation identified by the authors as a function of the foreign exchange market?
A) Obtaining or providing credit for international trade transactions.
B) Minimising the risks of exchange rate changes.
C) The transfer of purchasing power between countries.
D) All are identified as functions of the foreign exchange market.
All are identified as functions of the foreign exchange market.
_______ is NOT one of the three categories reported for foreign exchange.
A) Swap transactions.
B) Strip transactions.
C) Spot transactions.
D) Forward transactions.
Strip transactions.
A ________ transaction in the foreign exchange market requires an almost immediate delivery (typically within two days) of foreign exchange.
A) Forward.
B) Spot.
C) Futures.
D) None of the above.
Spot.
