In the previous newsletters we often discussed new regulations for multinational corporations that politicians implement to try and counter what they call unfair tax advantages. At first this seems morally just. It is easily sold to the public. However, there are some unintended consequences to this line of thinking.
The small and medium sized owners that are internationally active are the ones who are mostly affected by this. More reporting. More legislation. More compliance. Writing hours. All the bureaucratic nonsense that suffocates the ordinary business owners, who usually completely lack affinity doing administration.
It costs them money. They have to hire accountants and advisers. All that, to make sure they comply with all the regulations the bureaucrats come up with.
Another effect is that because there is so much tax and regulation in the West, ambitious and productive young people decide to move their business elsewhere. It also gets harder for foreign parties to engage in business in the West. All these regulations pose extra costs and risks. For example, some financial institutions simply decide not to provide their services to Westerners anymore.
When you are an American, you simply will have a hard time opening a bank account in a lot of places outside the US. We also experienced Swiss banks that will not take on Germans, French and Dutch clients.
This trend is ongoing. It is getting harder to engage in business for most international entrepreneurs. A lot of people think; this is not important for me. Only “rich” people and evil tax avoiders will be affected by this. But check it the next time you do groceries. Pure local products are almost nonexistent. All is imported by multinational companies. If this process is frustrated, prices will go up.
The intention was to have restrictions on big corporations. Are there any? Perhaps a little. But here is why they do not care.
 

Why Regulations For Multinational Corporations Do Not Have The Desired Affect

It is not cheap setting up offshore structures. Getting tax advice. Setting up legal entities. Hiring office space. At least, for the vast majority of companies. But let’s look at it from a multinational perspective. A big billion dollar company. They do not care about tens of thousands of Euros in legal fees. They do not care about transferring some of their activities abroad. They do not care about hiring a few top lawyers at 500 Euro’s an hour.
They are happy to do so. Because they know most businesses cannot afford that. Small and medium sized competition? Easily weeded out. That is why with heavily regulated industries usually only a few players are left.
Their top lawyers are able to use every inch of the law to their advantage. They will even “lobby” for regulation to be implemented. The more regulation, the less competition, the better. So do not be fooled by the politicians and their hard talk. They might even be paid to do so.
The financial services industry is a good example. Only large banks can survive. And they are now so big, that even the government cannot touch them without seriously disturbing the economy. Not that they would want that, these companies will provide a perfect “revolving door” opportunity once their time in office is done (and they implemented favourable rules, or looked the other way when needed).
 
Because of all these regulations for multinational corporations it is getting more difficult for small and medium sized business owners and individuals in the “free” and “capitalist” West. And nobody can really predict where it will end. Who knows what will be regulated in the future that will have unintended consequences.
Taking out undeclared cash on holiday? Please fill in form W-44 and provide a legalized utility bill. Buying a house in the south of Spain? Get approval of the foreign investment committee. Wiring money funds to your kid who is studying abroad? He better have receipts of all the drinks he buys!
To summarize. All these regulations do not have the intended effect. A few big corporations, banks, and bureaucrats are better off. Everybody else worse.
 
There are still loopholes that small entrepreneurs can use. Visit the About Freemont page to see how we can help you legally reduce your tax burden.
 
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Check how in some European countries pensions are already being confiscated. Poland Pension Confiscation – Nothing To See Here!
 
Interested what other political risk you face? Political Risk And Asset Protection.
 
Apple is not only good at making smart phones, they also know the tax loopholes. This leads to controversy. As is discussed here: Irish Tax Deal Apple – EU Crossing The Line