Tax liability on its ethiopian subsidiary

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Reference no: EM131589815

Tailor Johnson, a U.S. maker of fine menswear, has a subsidiary in Ethiopia. This year, the subsidiary reported and repatriated earnings before interest and taxes (EBIT) of 273 million Ethiopian birrs. The current exchange rate is 8.2909 birrs/dollar or S=$0.1206/birr. The Ethiopian tax rate on this activity is 19%. U.S. tax law requires Tailor Johnson to pay taxes on the Ethiopian earnings at the same rate as on profits earned in the United States, which is currently 44 %.However, the United States gives a full tax credit for foreign taxes paid up to the amount of the U.S. tax liability. What is Tailor Johnson's U.S. tax liability on its Ethiopian subsidiary?

Reference no: EM131589815

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