Using the data in Extracts E and F, calculate the amount Pfizer would have saved on Corporation Tax in Ireland, rather than the USA - Edexcel - A-Level Business - Question 2 - 2017 - Paper 1

To calculate the pre-tax profit for Pfizer in the USA:

1. Identify the corporation tax rate in the USA for 2014: The corporation tax rate in the USA was 40%.

2. Calculate the tax based on the profit:

   $$\text{Tax} = \text{Profit} \times \text{Tax Rate} = 9.135bn \times 0.40 = 3.654bn$$

3. Calculate the profit after tax:

   $$\text{Profit After Tax} = \text{Profit} - \text{Tax} = 9.135bn - 3.654bn = 5.481bn$$

4. Calculate the equivalent amount in Ireland with a tax rate of 12.5%:

   $$\text{Tax in Ireland} = 9.135bn \times 0.125 = 1.141875bn$$

5. Calculate the total amount they would have if based in Ireland:

   $$\text{Profit After Tax in Ireland} = 9.135bn - 1.141875bn = 7.993125bn$$

6. Amount saved:

   $$\text{Savings} = 5.481bn - 7.993125bn = 2.5125bn$$