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Assume that A and B are two subsidiaries of company AB and that they are based in different countries. A is subject to a tax
- Assume that A and B are two subsidiaries of company AB and that they are based in different countries. A is subject to a tax rate of 30% and B is subject to a tax rate of 10%. Also assume that A and B each make a profit of $20 when A sells a widget to B at a transfer price of $70.
- Calculate the taxes paid by A at a transfer price of $70.
- Calculate the taxes paid by B at a transfer price of $70.
- Calculate the total taxes paid by AB at a transfer price of $70.
- Calculate the effective tax rate of AB at a transfer price of $70.
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