A Multinational Corporation May Attempt to Minimize the Taxes It

question 1

Multiple Choice

A multinational corporation may attempt to minimize the taxes it pays in a country with a high effective tax rate by setting a very high transfer price on goods transferred to a subsidiary in a high-tax country. Why is this often not successful?

• A)Laws in the foreign country may prohibit such a scheme.
• B)The high transfer price would actually increase taxes.
• C)Foreign exchange losses will eliminate any tax savings.
• D)none of the above.

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Definitions:

Catastrophe

A sudden and widespread disaster that significantly disrupts the functioning of a community or society.

Shock Stage

The initial phase in the stress response where the body reacts to a stressor with physiological and psychological symptoms.

Bereavement

The state of loss and grief experienced when a loved one dies, involving a period of mourning and adjustment.

Positive Reappraisal

A cognitive process in which a person focuses on the good in what seems to be a negative situation, helping to manage emotional responses.