The Global Governmental Crusade Against Cross-Border Tax Effectiveness
Business owners and individual taxpayers are constantly in a natural tug-of-war with governments and their tax authorities. It is well understood that the world’s oldest profession isn’t the one they reference in movies and school textbooks but more likely is tax evasion. While tax evasion is illegal, wrong, and in some countries is even a capital crime, tax avoidance is universally legal, moral, ethical, and prudent.
Of course, the difference between avoidance and evasion is frequently in the eye of the beholder. A revenue officer far too frequently sees evil whereas the taxpayer sees smart structuring.
While there are hundreds of scholarly articles and nearly as many books dedicated to tax policy, in order to avoid death by boredom, we’ll summarize our view of the major issues impacting the current pressure relative to global tax and operational structuring.
- The economics of Business have changed while government policies lag. Wealth today is more frequently the result of ideas and intangible process (like connecting people on a web page out “there” somewhere where “out there” doesn’t have to be here.
- Hence governments want to tax stuff that is made and tangible and doesn’t know well how to tax things that are intangible.
- Governments wrote rules and regulations to follow, taxpayers are incentivized to lower their tax bills whenever possible by finding creative paths through the government’s complexity.
- Several very large companies (Google, Starbucks, Apple, etc.) have leveraged these global tax rules by (legally) arranging their services to take advantage when possible and when it makes sense in a business context. The amount of tax avoided by these structures created negative publicity while legal opponents believe that these companies should have paid more tax than required.
- Due to the various pressures from NGOs, OECD member countries, and the G20 finance ministers, leading nations and economic zones (e.g. the EU, USA, Asia/Pac, etc.) have increased their review of business structuring in order to ascertain the structures meet economic and legal requirements.
- Businesses that fail to modernize their own structural strategies with proper economic and taxation support will find themselves in continuing challenges as to the legality of the structures, their ability to secure banking, their ability to transact business across borders, and their ability to retain more of what they make.
While tax evasion is illegal, wrong, and in some countries is even a capital crime, tax avoidance is universally legal, moral, ethical, and prudent.
Global structuring in the 21st century is more complex than ever. While the benefits of an effective structuring benefit cash flows and frequently save taxes, their true value resides in operational and economic effectiveness in order to maximize revenues and profits while avoiding many costs and pitfalls. The best businesses work with skillful guides who facilitate their global business platform and structure.
If you aren’t working with a skillful guide already, it is time to contact me (Daniel Morris).
Daniel frequently provides Media Content via Workshops, Podcasts and Printed Articles on topics like Cross Border Transactions, Wealth Preservation and Planning, Global Banking and many other high-level financial topics that serve and demonstrate the Value of our Global Network that should be of interest to those who need Private High-Wealth Services. If you wish for Daniel to speak to you or your Professional Group, please contact us.
Morris+D’Angelo is the industry leader for many High-Wealth Customers and Organizations.
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