Last year (2018), the Congress enacted a new tax law which decreased the corporate tax rate...
Last year (2018), the Congress enacted a new tax law which decreased the corporate tax rate from 35% to 20%. Using the Transfer Pricing principle, we can expect that in 2019 and beyond, U.S. multinationals are likey to report
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higher profits in their U.S. subsidiaries |
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lower profits in their U.S. subsidiaries |
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no change in where the multinationals report their profits |
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an increase in expenses in their U.S. subsidiaries |
Homework Answers
Option 1. Higher profits in their US subsidies
Explanation: Low corporate tax rates reduces the tax liability of these firms. Therefore, they have an increased incentive to report higher profits in the subsidiaries.
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