©THEBRIGHT EXAM SOLUTIONS
11/05/2024 12:06 PM
Chapter 15 Exam Questions With Correct
Answers
1) 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) "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 - answer✔B) full disclosure to the tax authorities.
2) Which of the following is an unlikely objective of U.S. government policy for the taxation of foreign
MNEs?
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. - answer✔D All of the above are objectives.
3) A ________ tax policy is one that has no impact on private decision-making, while a ________ policy
is designed to encourage specific behavior.
A) flat; tax incentive
B) neutral; flat
C) neutral; tax incentive
D) none of the above - answer✔C) neutral; tax incentive
4) Which of the following is NOT an example 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.
, ©THEBRIGHT EXAM SOLUTIONS
11/05/2024 12:06 PM
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. - answer✔D) All are examples of a tax incentive policy.
5) Toyota Motor Company operates in many different countries and pays taxes at many different rates.
However, they always pay the same rate as their local competitors. Toyota Motor Company is operating
in an environment of ________ tax policy.
A) domestic neutrality
B) foreign neutrality
C) territorial approach
D) none of the above - answer✔B) foreign neutrality
6) The United States taxes the domestic and remitted foreign earnings of U.S. based MNEs no matter
where the earnings occurred. This is an example of a/an ________ approach to levying taxes.
A) worldwide
B) territorial
C) neutral
D) equitable - answer✔A) worldwide
7) The United States taxes all earnings on U.S. soil by both domestic and foreign firms. This is an example
of a ________ approach to levying taxes.
A) worldwide
B) neutral
C) territorial
D) none of the above - answer✔C) territorial
8) 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 their income is 50%. In theory, and barring any
special provisions in the tax codes of either country, Bacon should pay taxes at a rate of ________ in the
country of incorporation.
A) 75%.
B) 62.5%.
C) 0%.
11/05/2024 12:06 PM
Chapter 15 Exam Questions With Correct
Answers
1) 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) "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 - answer✔B) full disclosure to the tax authorities.
2) Which of the following is an unlikely objective of U.S. government policy for the taxation of foreign
MNEs?
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. - answer✔D All of the above are objectives.
3) A ________ tax policy is one that has no impact on private decision-making, while a ________ policy
is designed to encourage specific behavior.
A) flat; tax incentive
B) neutral; flat
C) neutral; tax incentive
D) none of the above - answer✔C) neutral; tax incentive
4) Which of the following is NOT an example 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.
, ©THEBRIGHT EXAM SOLUTIONS
11/05/2024 12:06 PM
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. - answer✔D) All are examples of a tax incentive policy.
5) Toyota Motor Company operates in many different countries and pays taxes at many different rates.
However, they always pay the same rate as their local competitors. Toyota Motor Company is operating
in an environment of ________ tax policy.
A) domestic neutrality
B) foreign neutrality
C) territorial approach
D) none of the above - answer✔B) foreign neutrality
6) The United States taxes the domestic and remitted foreign earnings of U.S. based MNEs no matter
where the earnings occurred. This is an example of a/an ________ approach to levying taxes.
A) worldwide
B) territorial
C) neutral
D) equitable - answer✔A) worldwide
7) The United States taxes all earnings on U.S. soil by both domestic and foreign firms. This is an example
of a ________ approach to levying taxes.
A) worldwide
B) neutral
C) territorial
D) none of the above - answer✔C) territorial
8) 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 their income is 50%. In theory, and barring any
special provisions in the tax codes of either country, Bacon should pay taxes at a rate of ________ in the
country of incorporation.
A) 75%.
B) 62.5%.
C) 0%.
