Corb7 International December 2011 Newsletter

2011 Year-End Editorial

Several years ago I wrote an article for C&K Magazine entitled, “Tax Competition Between Nations.” (See the “tug of war” magazine cover and go to p.47 http://corb7.com/services-to-assist-you/services-to-assist-you-publish) The premise of the article was that US regulatory and tax environment was not only handcuffing business but driving it offshore in droves. Within the pages of the commentary, we went on to point out the hypocrisy in painting competing governments as cheats for offering incentives to attract business when the US was at that time – and remains to this day – the largest tax haven in the world.

The US functioning as a tax haven to foreign investment is not a bad thing. Virtually every nation in the world competes in this manner to attract foreign capital or direct foreign investment. Economic realities make it a necessity for continued national growth. It seems, nevertheless, the old adage still rings true in that “the more things change… the more they stay the same.” The US continues to talk out of both sides of its figurative mouth. It is common knowledge that the current recovery is fragile and suspect with the stock market reacting to reports from Europe seemly every day. The global economy is more entangled than ever and just barely survived the economic crisis of 2008. Literally billions of dollars found shelter from the storm and currently sit on the sidelines waiting for a reason to invest. As a result, attracting investment capital (domestic and foreign) is more difficult than any point in recent history but still remains essential for the creation of jobs and increasing tax base. Yet, under the guise of patriotism, the United States seems to think it should not have to compete for it or can force business and investment to stay. Even worse the current administration has on more than one occasion sided with the “Occupy Movement” which makes no secret about its intentions to demonize business and disrupt commerce. The consequence of such actions is that the US presently holds the unenviable reputation as an anti-business jurisdiction. Nothing in this world is more mobile than the wealthy and their money.

Business Owners

If you are the owner of small business or the CEO of a small cap corporation, no one is coming to bail you out. This reality held true in “08” and is applicable to entrepreneurs inside or outside of the US at present. Nonetheless, you have the obligation to yourself, your family, your employees and their families to keep your doors open. To that end, you would almost be negligent if you didn’t explore every possible strategy. This would include at least partially implementing an offshore approach to reduce costs. To endure in this current global economic environment, you as a business leader, will need to stay open minded and think outside the proverbial box on a consistent basis. Nowadays, because of the internet, it almost goes without saying that most successful businesses are multinational. Therefore by definition, they have offshore interests. These businesses are not evil or unpatriotic. They are merely opening new marketplaces and using the advantages of one jurisdiction over another. Consequently, they are demonstrating good business planning and common sense. It is no different than a US business choosing Delaware or Nevada to incorporate domestically rather than a less favorable jurisdiction.

Banks

I recently came across this quote and think it gives us a quick snapshot of what we are facing today both on Wall Street and Main Street. “Banks provide the grease which lubricates the wheels of commerce without which the economy is frozen.” There can be little doubt that money remains tight and financing at times impossible. While it is certainly prudent to maintain a cautious eye towards banking practices – we also need to move forward. With all due respect to the fictional Wall Street character of Gordon Gekko – greed is not good and doesn’t work – it just is … and always will be. Capitalism is what really works and therefore is good. Let us also be judicious in lending credibility to any mob mentality that would offer a perspective that every bank is evil and all bankers are Satan. This is a ridiculous outlook which actually does a disservice to those that have been harmed by the crisis. Chasing business and jobs away is not the answer and a government certainly cannot tax what is not there in the first place. We contend that the “Occupy” movement is not comparable to the Arab Spring, lacks focus and needs to go away before it causes real damage. It may have at its origins in good intentions but much of what we have seen is a high-level of gullibility and certainly a lack of understanding basic business concepts. Socialism does not work and therefore is bad.

Looking Forward & Conclusion

2012 is likely to be more of the same with stock markets and global business reacting to the Presidential election in the United States and the debt crisis in Europe. We will be bombarded with hard-hitting political rhetoric from both sides of the isle until the November 2012 selection. In the interim, the two political parties in the US will continue to fight like a couple going through a bad divorce. Republicans and Democrats will persist with their ceaseless brawling which negatively influences world markets – resulting in each side barely keeping the lights on, not paying the mortgage, running up debt and using the children (voters) as pawns – all in a poorly veiled fight for personal gain. One of our guilty pleasures is the movie “Roadhouse.” In one scene Patrick Swayze laments, “It is going to get a lot worse before it gets better.” So true and we can think of no more appropriate motto for 2012 which leads us to our final point. In this environment, as a business owner, you better be open to going offshore. Please keep in mind; however, going overseas for either personal or business reasons does not eliminate the tax obligations for US citizens.

May 2012 offer you peace, good health and the opportunity for prosperity.