A Multinational Corporation May Attempt to Minimize the Taxes It

question 13

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:

Cohesive

The quality of forming a united whole, often referring to the ability of a group or team to work well together towards common goals.

Adjourning

The stage when individuals either leave the team or have no reason to be in further contact with their teammates.

ASA Model

The Attraction-Selection-Attrition model, which explains how individuals are attracted to, selected by, and remain in organizations.

Attraction-Selection-Attrition

A framework explaining how individuals are attracted to, selected by, and eventually leave organizations based on congruence with the organizational culture.