Friday, March 11, 2016

EU Clamping Down Again

In January I reported the European Union was making strides to cut tax loopholes on corporations. Now the continent is making its next step by agreeing to share information among all members  about every multinational companies revenues and expenses.  This is equivalent to each US state sharing information about every large company within their borders to other states which is unprecedented.

Imagine a company that sells pens. The pens are sold in every state, but the company only has operations in 7. It delivers to the other 43 states via 3rd party which would generally mean it operates its business in the other states despite having no physical nexus. Well now the other 43 states with no actual employees from that company based in their states are going to get financial and tax information from the other 7 states. That is what this sharing agreement is equivalent of.

Now it might not sound like a big deal at first. These are big companies which usually have the staff and resources to deal with compliance issues such as this. Plus big companies are a politicians favorite whipping boy since it pleases the masses to hear that type of propaganda. The problem becomes when it seeps into the lower rungs of business, and even down to individuals.

Let's take this a step further. Imagine that the rules are then placed on individuals. Most people might even begin to say well since business deals with this what's the big deal if we do too. So you travel to another state to visit their fine beaches for vacation. You return to your normal state after a week. Since you visited that other state they now get access to all your tax and property records since you had been inside their borders. It's the same concept, although the outcome is a bit outlandish I'll admit. Yet this is the path we are heading down that maybe 20-40 years from now this situation might be considered normal. Once the privacy line is crossed it becomes 10 times harder to restore it.

Small to medium size business with no operations across borders might become discouraged with expansion plans.  Now eventually they may shift gears, but that delay is costing everyone of us real growth and contributions to society. It will also force companies with smaller operations across a few borders to consolidate. With increased compliance costs it would only make sense to partner up with another company to help deal with the costs. This usually leads to layoffs as overlapping staff are cut. Of course this is a normal part of business progression. Yet the laid off person is feeling a real pinch to their finances and family life.

But why is there never any talk of the government rewriting the laws it states are causing the problems? Clearly they were put in place at one point or another with good intentions, right? That's what is concerning to me. There is no talk on how to rewrite the rules to be more concise and better for society. Government only talks about how they can share everyone's information to force compliance. That doesn't sound like the pro-active approach a reasonable person would expect. It's an approach we should be tired of. The government is always two steps behind, and never seems to admit wrongdoing.  If they had to be in business for themselves my guess is the majority would be bankrupt quickly.

It's no secret Europe is in dire financial straits right now. It's been awhile since we've heard about Greek bailouts and the PIGS, but make no mistake it's probably not far away again. I'd advise all people to not put their money in European banks, nor would I be an investor in one either. As they say when you dance with the devil sometimes you get hurt. The insolvency of many European governments is what is forcing this type of action. Although that's not the only contributing factor. Still it appears there is no relief in sight for European business. The EU will continue to strangle the economy until there is nothing left.



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