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Chapter 6: Q1 - Critical Thinking Questions (page 136)

Why is the main objective of these cross border mergers, whether the US firm is the acquirer or the company that is acquired, to change the legal domicile of the merged firm from the standpoint of income taxation .

Short Answer

Expert verified

The main objective of US cross border mergers is corporate tax savings by companies, as US corporate taxes rate are the highest.

Step by step solution

01

Basics 

Corporate mergers and takeovers across national borders lead to - shifts of headquarters in other country, or levy of low foreign tax rate for the combined company. It implies lesser tax base for US and lesser corporate tax payment by companies, decreased corporate tax revenue in US.

02

Explanation 

It is an incentive for companies to do so, based on the reason that US corporate tax rate is highest in the entire world.

Example : Burger King made huge tax savings by taking over a Canadian food chain and shifting headquarters there.

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Most popular questions from this chapter

6-3. Consider the table below when answering the following questions. Show your work, and explain briefly.

a. What is Christino's marginal tax rate?

b. What is Jarius's marginal tax rate?

c. What is Meg's marginal tax rate?

Between 2017 and 2018, the income received by a company located in a city rose from \(5,000,000 to \)6,000,000. The annual city income taxes that the company paid increased from \(250,000 to \)500,000. What was the company's average city income tax rate in each year?

The following information applies to the market for

a particular item in the absence of a unit excise tax:

a.According to the information in the table,in the

absence ofaunit excise tax,what is the market

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b.Suppose that the government decides to subject

producers of this item toaunit excise tax equal

to$2per unit sold.What is the new market

price?What is the new equilibrium quantity?

c.What portion of the tax is paid by producers?

What portion of the tax is paid by consumers?

The sales tax rate applied to all purchases within a state was 0.04 (4 percent) throughout 2016 but increased to 0.05 (5 percent) during all of 2017. The state government collected all taxes due, but its tax revenues were equal to $40 million each year. What happened to the sales tax base between 2016 and 2017? What could account for this result?

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a. Use an appropriate diagram to predict the effects of the ticket tax on the market-clearing price of London airline tickets and on the equilibrium number of flights into and out of London.

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