Where ever you city you visit or live in, you can look at the towers downtown and see many corporations occupying the floors of the office buildings. You may think to yourself those companies are providing jobs for the economy, there support the United Way and Hospitals or your favorite charity and are doing good. The reality is the head office do those types of things, but they also use all the tax rules to pay as little as possible and still be good citizens. Around the world there exist countries which through book entries companies can pay no tax, just a post office box, a lawyer’s office and easy to receive permit. Technically the services are paid by the no tax country’s office and that is a tax deduction against the high tax country. Everyone knows it, the tax free country play important roles in the economy and they are not going away.
In an article by David Milliken of Reuters, the finance ministers of the G7 countries met in London in early June and decided to close the net of large companies to pay their fair share of tax. They will set a minimum so the race to the bottom is stopped and companies have to pay something to the countries in which they operate.
Naturally every finance minister wants their hands on more revenue, the mechanics of how to get it is and reduce some loopholes is the work arounds. In the world of corporate treasurers, whatever is reached needs to be abided by, however in the office buildings there are also consultants whose job it is to find the loopholes in the legislation to ensure the law is followed but not by as much money as finance ministers are hoping for.
Linking to dividend paying companies, by virtue of being profitable they will pay tax, how much is the debatable issue. Generally corporate treasurers will ensure there is something because they pay consultants to help write legislation to lessen competition or ensure they have a built in advantage. For the world having a minimum global tax rate is a good thing.
There are more questions than answers, till the next time – to raising questions.