2. Taxation of Foreign Source Income (A-intermediate). Fluor Inc. is a U.S.-based global engineering and construction company. Its Brazilian subsidiary earned $112 million in 2012, which is taxed at the Brazilian corporate income tax of 30 percent.

Dividends repatriated to the U.S. parent are further subjected to a 10 percent withholding tax. Corporate income tax in the United States stands at 34 percent and is applicable to foreign-source income.

a. Assuming that Fluor Inc. decides not to repatriate dividends from its Brazilian subsidiary in 2012, what is the total amount of taxes paid by Fluor in both Brazil and the United States on its profit of $112 million?

b. How does repatriation of 100 percent of profit earned in Brazil in the form of dividends change Fluor’s global tax bill?

c. Assuming that Fluor operated in Brazil as a branch rather than a wholly owned subsidiary, how would its global tax bill be different?