Calculate the total amount of income taxes paid

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Question - A Chinese manufacturing subsidiary produces items sold in Australia. The items cost the equivalent of $7.00 to produce and are sold to customers for $9.50. A Cayman Islands subsidiary buys the items from a Chinese subsidiary for $7.00 and sells them to the Australian parent for $9.50.

Required -

1. Calculate the total amount of income taxes paid on these transactions. What are the implications for the company and the taxing authorities involved?

2. Consider the statement "National differences in statutory tax rates are the most obvious and yet least significant determinants of a company's effective tax burden." Do you agree? Explain.

Reference no: EM133111107

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