Maple Cargo is an all-cargo airline that operates on four continents. Its headquarters are in New Zealand. It has two divisions, Cargo and Maintenance. Cargo Division flies cargo to and from international locations. Maple Cargo also has a maintenance facility located in Hong Kong and schedules its planes in such a way that most maintenance can be done there. In addition to Maple aircraft, Maintenance Division also provides services to several other passenger and cargo air companies.

All of the Cargo Division income is deemed to be earned in New Zealand. Income from the Maintenance Division is deemed to be earned in Hong Kong. Maples income deemed attributable to New Zealand is taxed at a 28 percent rate. Its income attributable to Hong Kong is taxed at a 16.5 percent rate. Last year, Maintenance Division had operating revenues of $51 million, excluding services performed for Cargo Division aircraft. Cargo Division revenues last year were $186 million.

Operating costs of Maintenance Division were $36 million last year, and operating costs for the Cargo Division, before considering maintenance costs, totaled $86 million. No similar maintenance facilities in Hong Kong are available to Maple.

Recently, a maintenance facility opened in Malaysia. That facility proposed to Cargo Division that it could conduct the maintenance in Malaysia. The facility proposed a price of $45 million for the services that Maintenance Division in Hong Kong provided to Cargo Division. Maple management estimated that had the services been provided in New Zealand, the costs for the year would have totaled $62 million. In its latest tax filing, Maple assigned the $62 million as the appropriate transfer price Cargo paid for the services from Maintenance. The New Zealand tax authorities denied that expense and instead applied $45 million as the appropriate transfer price.

Required:

Calculate the total revenue, total costs, and income taxes for both the Cargo Division and the Maintenance Division and the total taxes for the company as a whole using Malaysia basis.

Calculate the total revenue, total costs, and income taxes for both the Cargo Division and the Maintenance Division and the total taxes for the company as a whole using the New Zealand basis.

What is the difference in tax costs to Maple between the alternate transfer prices for maintenance services, that is, the difference between a transfer price of $45 million and $62 million?