Explain the worldwide and territorial approaches of national taxation. The authors state that the United States uses both approaches. How can this be? Give an example of each taxation approach
What will be an ideal response?
Answer: The worldwide approach taxes the income of firms based on their place of residence rather than on where the income was earned. Thus, a U.S. based MNE will owe U.S. taxes on income earned in, say, Britain. The territorial approach to taxation taxes all of the income earned within the borders of the country by both domestic and foreign-based firms. Thus, a British-based firm making sales in New York will owe taxes in the U.S.
Through a series of bilateral tax agreements the U.S. and several trading partners have tried to workout tax issues. Generally, the taxes a U.S. based MNE pays abroad will help offset any required taxes the firm might have on funds remitted to the United States.
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Sam is a CPA and a partner in the firm of Taxes-R-Us, LLP. One of Sam's former partners is under investigation by the Office of Professional Responsibility for disreputable conduct. Sam has been asked by the Office of Professional Responsibility to provide information regarding his former partner. Sam must provide all the information requested unless
A. He has credible evidence that his former partner is not guilty of the disreputable conduct. B. He believes in good faith and on reasonable grounds that the information requested is privileged or that the request is of doubtful legality. C. The partnership agreement prohibits him from providing the information. The conduct in question relates to one of Sam's clients. D. The conduct in question relates to one of Sam's clients.
David owns a commercial building with a replacement cost of $4 million. The building is insured on a replacement cost basis for $2.4 million under a fire insurance policy that has an 80 percent coinsurance clause
How much will David collect if the building sustains a covered fire loss with a replacement cost of $80,000? A) $50,000 B) $60,000 C) $66,667 D) $80,000