Question
Orange is an cell phone manufacturer headquartered in the U.S., with a subsidiary located in Bermuda. Assume the U.S. has a 20% corporate tax rate
Orange is an cell phone manufacturer headquartered in the U.S., with a subsidiary located in Bermuda. Assume the U.S. has a 20% corporate tax rate and Bermuda has a 0% corporate tax rate. Orange has licensed all of its cell phone technology to the subsidiary. This past year, Orange made $10 million dollars in pre-tax profits in the U.S., and out of those profit also paid $4 million in licensing fees to its Bermuda subsidiary. How much LESS total corporate tax (in both countries) did Orange pay because it set up the tax haven subsidiary in Bermuda?
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