When a company incorporated in a country with a high tax rate does business in countries with lower tax rates, it will report an effective tax rate below its statutory rate. Is the difference sustainable into the future? What

occurs if the company decides to repatriate earnings? Howshould operating taxes be computed in the year of repatriation? How is ROIC distorted by foreign taxation and repatriation?

Transcribed Image Text:

EXHIBIT 25.9 ToyCo: Tax Reconciliation Table percent Year1 Year2 Year 3 35.0 0.7 Statutory income tax rate State and local income taxes, net Repatriation of foreign earnings Liabilities settleable in common stock Tax on international eamings Exam settlements Other, net Effective tax rate 35.0 1.1 35.0 1.0 3.5 34 (6.5) 79 7.5) (6.5) 08) 0.5) 1.5 28.0 10.4) 304 29.2 Profits (millions of dollars) Operating profit (EBITA) Earnings before taxes 587.1 5726 6736 462.3 44.1 529.7