U.S.-based Crusty Creations, Inc. sells its prepackaged pastries in Mexico and Chile. Each facility earns the equivalent

Question:

U.S.-based Crusty Creations, Inc. sells its prepackaged pastries in Mexico and Chile. Each facility earns the equivalent of $10,000 in foreign-source income before tax. Mexico has a 30 percent corporate income tax and no withholding tax. Chile has corporate income taxes of 20 percent and withholding taxes of 35 percent.
a. Calculate the overall U.S. tax liability (or excess FTC) of Crusty Creations.
b. If Crusty Creations can shift operations so that pre-tax income is $20,000 in Mexico and zero in Chile, what is its U.S. tax liability (or excess FTC)?
c. If Crusty Creations can shift operations so that pre-tax income is $20,000 in Chile
and zero in Mexico, what is its U.S. tax liability (or excess FTC)?
d. How feasible is a tax-driven strategy of shifting revenues toward low-tax countries in the presence of implicit taxes? Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...