Tanks and Toilets Inc. is a Canada-based MNC that manufacturers stainless steel bathroomfixtures. of $100,000 before foreign taxes. All before-tax earnings are to be paid to the parent as interest. The foreign taxes include an income tax rate of 30 percent and an interest withholding tax of 15 percent. The firm's marginal tax rate in Canada is 45 percent. The amount of tax paid to the Canadian government would be

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The foreign income tax is $30,000 (30% of $100,000), and the withholding tax is $10,500 (15% of $70,000, which is the remaining amount after income tax). The total foreign taxes paid are $40,500. The Canadian tax liability is $45,000 (45% of $100,000), but the firm can credit the foreign taxes paid, so the tax paid to the Canadian government is $45,000 - $40,500 = $4,500. However, since the question asks for the total tax paid to the Canadian government, it is $30,000, which is the Canadian tax liability after accounting for foreign tax credits.