 Question 1

1 out of 1 points

Tax neutrality is determined by three criteria: which of the following doesn't belong?

Correct Answer:
Income neutrality
 Question 2
1 out of 1 points

If a dollar earned by a foreign affiliate is taxed under the same rules as a dollar earned by a
domestic affiliate of the MNC, then we have achieved

Correct Answer:
tax equity.
 Question 3
1 out of 1 points

A withholding tax

Correct
Answer: is borne by a taxpayer who did not directly generate the income that serves as the
source of the passive income, and also assures the local tax authority that it will
receive the tax due on the passive income earned within its tax jurisdiction.
 Question 4
1 out of 1 points

Many economists prefer a VAT to an income tax because

Correct
Answer: an income tax provides a disincentive to work, whereas a VAT is a disincentive
to unnecessary consumption.
 Question 5
1 out of 1 points

Assume that a product has the following three stages of production:

Production Stage Selling Price

1 € 800

2 € 960

3 € 15,000
 If the value-added tax (VAT) rate is 20 percent, what would be the VAT over all stages of
production?
Correct Answer:
€3,000
 Question 6
1 out of 1 points

In a given year, the U.S. IRS places an overall limitation applied to foreign tax credits.

Correct
Answer: the maximum tax credit is figured on world-wide foreign-source income; losses in
one country can offset profits in another, and the overall limitation is limited to the
amount of tax that would be due on the foreign-source income if it had been earned
in the United States.
 Question 7
0 out of 1 points

A controlled foreign corporation (CFC) is

Correct
Answer: a foreign subsidiary that has more than 50 percent of its voting equity owned by
U.S. shareholders.
 Question 8
1 out of 1 points

If U.S. taxing authorities did not limit the amount of the foreign tax credit to the equivalent
amount of the U.S. tax

Correct
Answer: payers would arguably subsidize part of the tax liabilities of U.S. MNC's foreign
earned income.
 Question 9
1 out of 1 points

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

Correct
Answer: 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.
 Question 10
1 out of 1 points

In a growing economy, the VAT would raise prodigious amounts of money

Correct Answer:
in a way almost invisible to tax-paying voters.