Chapter 7. Basics of Corporate Taxes and Tax Risk Management

Agenda

Item 1

Discuss the main types of taxes.

Item 2

Explain what tax management is and how it has changed since the 1990s.

Item 3

Identify the role of the CFO in tax management.

Item 4

Identify the factors that had a significant impact on tax directors in assessing tax risk.

Item 5

Explain what tax risk management is.

Item 6

Discuss the different types of tax risk and the types of events that give rise to them.

Item 7

Understand the basics of the U.S. federal income tax code as they pertain to corporate taxes: marginal tax rates, tax treatment of interest expense and dividends paid, dividends‐received deduction, depreciation for tax purposes, and net operating losses.

Item 8

Explain differences in the taxation of corporations in non‐U.S. countries.

Item 9

Understand the issues of thin capitalization and transfer pricing associated with corporate taxation throughout the world.

Taxes are a significant cost in doing business and have a far‐reaching impact on many corporate decisions—strategy, financing, capital budgeting, and corporate acquisitions/joint ventures. Following are the main kinds of taxes paid by a corporation in the United States:

  • Income taxes: Taxes specifcally levied on the basis of income.

  • Employment taxes: Taxes that are based on income, but specifcally on wage and salary income. In the United States, employment taxes are paid by the employee and the employer.

  • Excise taxes: Taxes on certain commodities, such as alcoholic beverages, ...

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