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FAD/EUO Joint Conference on Public Health Care Reforms: Challenges and Lessons for Advanced and Emerging Europe




Keynote Address by Mr. Naoyuki Shinohara, Deputy Managing Director, IMF

Ladies and gentlemen, I am delighted to be here and to participate in this important conference on public health care reform in Europe. This morning’s discussion has already been extremely enlightening and productive, and I look forward to learning more this afternoon.
Despite a temporary slowing of economic activity, we expect the global recovery to continue, with world GDP growth projected at 4.3 percent this year and 4.6 percent in 2012. Downside risks, however, have increased again, and the global expansion remains unbalanced. Growth in many advanced economies is still weak, while growth in most emerging and developing economies continues to be strong. Greater-than-anticipated weakness in U.S. activity and renewed financial volatility from concerns about the fiscal challenges in the euro area periphery pose greater downside risks. There are also risks from persistent fiscal and financial sector imbalances in many advanced economies, while signs of overheating are becoming increasingly apparent in many emerging and developing economies. Against this background, my remarks today will concentrate on the fiscal policy challenges facing our member countries, and the potential role of public health care reform in helping countries meet these fiscal challenges.

The Fiscal Situation
In advanced economies, fiscal deficits remain very large, and the average public debt ratio by end-year will breach 100 percent of GDP for the first time since the aftermath of World War II. These fiscal trends are clearly not sustainable. Although countercyclical fiscal policy helped to save the global economy from a far deeper downturn, the fiscal fallout of the crisis now needs to be addressed if the recovery is to be sustained. The central challenge is to avert potential future fiscal crises, while at the same time maintaining social cohesion.
Fiscal consolidation is proceeding at a broadly appropriate pace in many advanced economies, notably in most of Europe and in Canada. Fiscal adjustment in Europe is also being accompanied by a strengthening of institutions and rules. In the United States, strong revenue growth and a slower pacae of spending mean that the 2011 budget deficit is now expected to be similar to 2010 in cyclically-adjusted terms, rather than expansionary as originally expected. This will make the planned adjustment in 2012 less abrupt, reducing the risk that it could negatively affect growth prospects. Nevertheless, consensus on a credible medium-term adjustment plan is still urgently needed. Similarly, a detailed medium-term adjustment plan is still missing in Japan, where the humanitarian costs of the recent natural disaster has led to a significant weakening of the fiscal accounts.
In some prominent adjustment cases in Europe, mostly notably Greece, Ireland, and Portugal, risk perceptions are rising, as reflected in sharp increases in bond spreads. This underscores the need for the European countries to work cooperatively to develop a comprehensive and consistent approach to crisis management in the euro area.
Against the backdrop of this historic fiscal challenge in the advanced economies, spending pressures from health care have been rising steadily. Since 1970, total health spending as a share of GDP has nearly doubled in the advanced economies, to almost 12 percent of GDP. Two-thirds of this increase was due to higher public health spending. As we heard this morning, prospects going forward are worrisome: with unchanged policies, IMF staff expects annual spending on public health in the advanced economies to increase by an average of 3 percentage points of GDP over the next 20 years, and by 6½ percentage points of GDP over the next 40 years.
These baseline projections assume no changes in the present roles of the public and private sector in financing and providing health care. Of course, these roles vary widely across countries, reflecting differences in country preferences and constraints. Indeed, there is no optimal level of public health spending that can provide a benchmark for comparing countries. Nevertheless, there is a need to ensure that whatever model a country adopts, public health care services are provided in an efficient way.
In this context, the projected increase in public health spending is also a concern because in most countries, this spending is not very efficient. This can be illustrated by examining the gains countries could achieve by getting rid of these “efficiency gaps” in health spending. This efficiency gap provides an estimate of the difference between the life expectancy countries currently achieve and the best performing countries at similar levels of spending. Based on the recent work by the OECD, cutting the efficiency gap in half could increase life expectancy by over one year. Achieving this through higher spending, in contrast, would require an increase in spending of 30 percent.
Turning to the emerging economies, the overall fiscal outlook appears more favorable, although this in part reflects the tail winds of high asset and commodity prices, low interest rates, and strong capital inflows. Their reversal could leave fiscal positions exposed in many cases. Further, some of these economies may be overheating, and need to make faster progress in reducing deficits to help offset pressures from rising domestic demand. For many emerging economies, the adverse fiscal impact of high fuel and food prices is also a major challenge.
Of course, in many emerging economies, including in emerging Europe, fiscal consolidation is also proceeding at an appropriate pace, and financial markets have recognized this. Further fiscal consolidation will nevertheless be needed in the years to come. Emerging Europe also faces long-term pressures on public health care and pension spending. This spending is projected to rise by an average of 4 percentage points of GDP over the next 20 years, compared with 2 percentage points of GDP in the emerging economies as a whole. In Russia, Turkey, and Ukraine, for example, this spending would rise by 4½ percentage points of GDP or more over the next 20 years, adding substantially to the burden of fiscal adjustment.

A Fiscal Strategy for Advanced Economies
What is needed to address the fiscal problems of advanced economies? First, I believe it is important to be clear about the final goal of any fiscal adjustment strategy. In my mind, there is no doubt that it should be to lower public debt ratios to more prudent levels, not just to stabilize them at post-crisis levels. The April Fiscal Monitor underscores that the magnitude of the adjustment needed to lower debt ratios is daunting. But the task is not impossible. The necessary ingredients include the right combination of expenditure cuts and revenue increases and reforms of age-related spending, including health.
Expenditure cuts will need to dominate the required adjustment process, but some revenue increases are likely to be necessary in several countries, given the magnitude of the necessary adjustment. This is especially true in countries with relatively low spending ratios. Consumption taxes may prove to be an important source of potential revenues. More generally, classic tax reforms—encompassing broadening tax bases while simplifying rules and rates—would be appropriate in many advanced economies. A key goal should be rolling back tax expenditures, as this would bring in substantial revenue while also improving both the efficiency and fairness of tax systems.
Expenditure reform should be guided by the desire to improve the efficiency of spending while ensuring equity. Cutting spending across the board has not proven to be very effective in the past, except in the very short run. A more strategic approach is needed when the adjustment effort is large and expected to be sustained over time. In many countries, better targeting of social welfare spending could provide substantial fiscal savings. There is also scope to reduce spending on subsidies, including agricultural subsidies, which are still large in some advanced economies. An effort is also needed to lower military spending over the medium term.
As part of the adjustment strategy, fiscal consolidations must also deal with the long-term spending pressures from age-related spending. Given the projected increases in both pensions and health spending, an ambitious goal for countries would be to stabilize this spending as a ratio of GDP. On pensions, many countries have already undertaken reforms, such as raising retirement ages. Pension spending is projected to rise by 1 percentage point of GDP over the next 20 years. This increase will need to be offset through further reforms.
Challenges are even more daunting in the health care area. Providing access to affordable health care is of paramount importance. At the same time, spending on health care is putting enormous pressure on public budgets. Most countries have yet to commit to deep reforms that promise long-lasting effects on spending. Still, it is important to recognize that some countries have been successful in containing the growth of health spending in the past, and for others this success is expected to continue. For example, Germany, Japan, and Sweden have managed to control spending increases over the longer term. As we heard this morning, we know from the experience of these and other countries that reforms can help slow the growth of health care spending while preserving equity and efficiency. The most promising strategies involve a mix of both macro-level instruments to contain costs and more micro-level reforms to improve the efficiency of spending. Among macro instruments, budget caps can be a powerful tool for reducing spending growth. Among micro reforms, strengthening market mechanisms by increasing patient choice, allowing greater competition between insurers and providers, and relying on a greater degree of private provision can help contain costs. Public management and contracting reforms, such as extending the use of managed care or shifting toward case-based payments, are also central to improving the efficiency of spending. Demand-side reforms, such as greater reliance on private financing and increased cost-sharing, can also be effective. A greater role for the private sector, however, should be accompanied by measures to ensure that the poor and chronically ill retain access to basic health services. Finally, supply constraints, such as those that ration high-technology equipment, can help reduce the growth of public health spending. The appropriate mix of these reforms options, of course, will vary by country and depend on the projected outlook for public health spending.
Health care reform has important implications for the range of services or products financed by the public sector. If containing public health spending growth is a priority, countries may face difficult choices regarding which services will be covered by the public benefit package and the role of the private sector in financing these services, including through private insurance. However, there are considerable market failures associated with private insurance markets. Thus, an expansion of private insurance would need to be accompanied by appropriate regulations to ensure access, equity, and efficiency.
In sum, containing health care spending will be an essential ingredient for successful fiscal adjustment in the advanced economies. However, even with extensive reforms, some countries may not be able to prevent an increase in health spending as a share of GDP, given the strong pressures from aging and the continued effects of technological improvements on health care costs. For these countries, even more ambitious cuts in other programs may be necessary to achieve their goals for fiscal adjustment.

Fiscal Adjustments in Emerging Economies
Turning to the emerging economies, a tighter fiscal stance than currently envisaged will be needed in the near term in many cases. Emerging economy deficits are falling, but in some countries the fiscal buffers eroded by the crisis need to be rebuilt to protect against sudden reversals in recent capital flows. At a minimum, the temptation should be resisted to use the current favorable tailwinds to boost spending.
Over the medium term, for many emerging markets a general increase in government spending is likely and is often even desirable. But the budgetary needs differ across countries: some will need reforms to help boost consumption; others need greater investment in infrastructure and other growth-enhancing spending.
In this context, health care reform is a critical issue, although the current challenges are a bit different from the ones facing advanced economies. Increases in health spending have been moderate over the past decades, and spending pressures are expected to be less severe than in advanced economies. At the same time, many countries need to further expand access to high quality health care. For the most part, health outcomes such as life expectancy and infant mortality continue to lag behind the advanced economies, and significant parts of the population are still uninsured and do not have access to adequate medical care.
Emerging Europe forms a special group, of course: spending is relatively high by emerging economy standards and coverage is nearly universal, but the challenge here remains to enhance the efficiency of spending to improve lagging health outcomes and the quality of service delivery. Like in the advanced economies, fiscal space is also limited in much of emerging Europe, placing a premium on reforms that improve health outcomes without raising public spending.
In conclusion, containing the growth of public health spending in an equitable and efficient manner will be a key ingredient for successful fiscal consolidation in advanced economies. There will thus be strong pressure on health systems to improve their efficiency to continue delivering improvements in health outcomes. Emerging Europe, which also has limited fiscal space, faces a similar situation. Despite this daunting challenge, there are grounds for optimism, given the successful reform experience of many countries. I hope and expect that today’s conference will provide a fruitful opportunity to exchange views on these experiences, to draw lessons from them, and to advance our knowledge on how best to approach the remaining challenges in health care reform in this region and beyond. I wish you a very productive and interesting remainder of the conference. Thank you very much.

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Lockdown 2.0 – Here’s how to be the best-looking person in the virtual room



Lockdown 2.0 – Here's how to be the best-looking person in the virtual room 1

By Jeff Carlson, author of The Photographer’s Guide to Luminar 4 and Take Control of Your Digital Photos

suggests “the product you’re creating is not the camera, the lens or a webcam’s clever industrial design. It’s the subject, you, which is just on e part of the entire image they see. You want that image to convey quality, not convenience.”

Technology experts at Reincubate saw an opportunity in the rise of remote-working video calls and developed the app, Camo, to improve the video quality of our webcam calls. As part of this, they consulted the digital photography expert and author, Jeff Carlson, to reveal how we can look our best online. 

It’s clear by now that COVID-19 has normalised remote working, but as part of this the importance of video calls has risen exponentially. While we’re all used to seeing the more casual sides of our colleagues (t-shirt and shorts, anyone?), poor webcam quality is slightly less forgivable.

But how can we improve how we look on video? We consulted Jeff Carlson for some top tips– here is what he had to say.

  1. Improve the picture quality of your call

The better your camera, the higher quality your webcam calls will be. Most webcams (as well as currently being hard to get hold of and expensive), are subpar. A DSLR setup will give you the best picture, but will cost $1,500+. You can also use your iPhone’s amazing camera as a webcam, using the new app from Reincubate, Camo.

Jeff’s comments “The iPhone’s camera system features dedicated coprocessors for evaluating and adjusting the image in real time. Apple has put a tremendous amount of work into its imaging software as a way to compensate for the necessarily small camera sensors. Although it all works in service of creating stills and video, you get the same benefits when using the iPhone as a webcam.”

Aidan Fitzpatrick, CEO of Reincubate explains why the team created Camo, “Earlier this year our team moved to working remotely, and in video calls everyone looked pretty bad, irrespective of whether they were on built-in Mac webcams or third-party ones. Thus began my journey to build Camo: an iPhone has one of the world’s best cameras in it, so could we make it work as a webcam? Category-leading webcams are noticeably worse than an iPhone 7. This makes sense: six weeks of Apple’s R&D spend tops Logitech’s annual gross revenue.”

  1. Place your camera at eye level

A video call will never quite be the same as a face-to-face conversation, but bringing your camera up to eye level is a good place to start. That can involve putting your laptop on a stand or pile of books, mounting a webcam to the top of your display screen, or even using a tripod to get the perfect position.

Jeff points out, “If the camera is looking down on you, you’ll appear minimized in the frame; if it’s looking up, you’re inviting people to focus on your chin, neck, or nostrils. Most important, positioning the camera off your eye level is a distraction. Look them in the eye, even if they’re miles or continents away.

Lockdown 2.0 – Here's how to be the best-looking person in the virtual room 2

Low camera placement from a MacBook

  1. Make the most of natural lighting

Be aware of the lighting in the room and move yourself to face natural lighting if you can. Positioning the camera so any natural light is behind you takes the light away from your face, which can make it harder to see and read expressions on a call.

Jeff Carlson’s top tip: “If the light from outside is too harsh, diffuse it and create softer shadows by tacking up a white sheet or a stand-alone diffuser over the window.” 

Lockdown 2.0 – Here's how to be the best-looking person in the virtual room 3Lockdown 2.0 – Here's how to be the best-looking person in the virtual room 4

Backlit against a window Facing natural light

  1. Use supplementary lighting like ring lights

The downside to natural lighting is that you’re at the mercy of the elements: if it’s too bright you’ll have the sun in your eyes, if it’s too dark you won’t be well lit.

Jeff recommends adding supplementary lighting if you’re looking to really enhance your video calls. After all, it looks like remote working will be carrying on for quite some time.

“The light can be just as easy as a household or inexpensive work light. Angle the light so it’s bouncing off a wall or the ceiling, depending on your work area, which, again, diffuses the light and makes it more flattering.

Or, for a little money, use a softbox or a shoot-through umbrella with daylight bulbs (5500K temperature), or if space is tight, LED panels. Larger lights are better for distributing illumination– don’t be afraid to get them in close to you. Placement depends on the look you’re going after; start by positioning one at a 45-degree angle in front and to the side of you, which lights most of your face while retaining nice shadow detail.” 

In some cases, a ring light may work best. LEDs are arranged in a circle, with space in the middle to put the camera’s lens and get direct illumination from the direction of the camera.

  1. Centre yourself in the frame

Make sure you’re getting the right angle and that you’re using the frame effectively.

“You should aim for people to see your head and part of your torso, not all the space between your hair and the ceiling. Leave a little space above your head so it’s not cut off, but not enough that someone’s eyes are going to drift there.”

  1. Be mindful of your backdrop

It’s not always easy to get the quiet space needed for video calls when working from home, but try as best you can to remove anything too distracting from your background.

“Get rid of clutter or anything that’s distracting or unprofessional, because you can bet that will be the second thing the viewers notice after they see you. (The Twitter account @RateMySkypeRoom is an amusing ongoing commentary on the environments people on television are connecting from.)”

A busy background as seen by a webcam

  1. Make the most of virtual backgrounds

If you’re really struggling with finding a background that looks professional, try using a virtual background.

Jeff suggests: “Some apps can identify your presence in the scene and create a live mask that enables you to use an entirely different image to cover the background. While it’s a fun feature, the quality of the masking is still rudimentary, even with a green screen background that makes this sort of keying more accurate.”

  1. Be aware of your audio settings

Our laptop webcams, cameras, and mobile phones all include microphones, but if it’s at all possible, use a separate microphone instead.

“That can be an inexpensive lavalier mic, a USB microphone, or a set of iPhone earbuds. You can also get wireless lavalier models if you’re moving around during a call, such as presenting at a whiteboard in the camera’s field of view.

The idea is to get the microphone closer to your mouth so it’s recording what you say, not other sounds or echoes in the room. If you type during meetings, mount the mic on an arm instead of resting it on the same surface as your keyboard.”

  1. Be wary of video app add-ons

Video apps like Zoom include a ‘Touch up your appearance’ option in the Video settings. This applies a skin-smoothing filter to your face, but more often than not, the end result looks artificially blurry instead of smooth.

“Zoom also includes settings for suppressing persistent and intermittent background noise, and echo cancellation. They’re all set to Auto by default, but you can choose how aggressive or not the feature is.”

  1. Be the best looking person in the virtual room

What’s important to remember about video calls at this point in time is that most people are new to what is, really, personal broadcasting. That means you can easily get an edge, just by adopting a few suggestions in this article. When your video and audio quality improves, people will take notice.

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Bringing finance into the 21st Century – How COVID and collaboration are catalysing digital transformation



Bringing finance into the 21st Century – How COVID and collaboration are catalysing digital transformation 5

By Keith Phillips, CEO of TISATech

If just six or seven months ago someone had told you that in a matter of weeks people around the world would be locked down in their homes, trying to navigate modern work systems from a prehistoric laptop, bickering with family over who’s hogging the Wi-Fi, migrating online to manage all financial services digitally, all while washing their hands every five minutes in fear of a global pandemic… You’d think they had lost their mind. But this very quickly became the reality for huge swathes of the world and we’re about to go through that all over again as the UK government has asked that those who can work from home should.

Unsurprisingly, statistics show that lockdown restrictions introduced by the UK government in March, led to a sharp increase in people adopting digital services. Banks encouraged its customers to log onto online banking, as they limited (and eventually halted) services at branches. This forced many customers online as their primary means of managing personal finances for the first time.

If anyone had doubts before, the Covid-19 pandemic proved to us the importance of well-functioning, effective digital financial services platforms, for both financial institutions and the people using them.

But with this sudden mass online migration, it’s become clear that traditional banks have struggled to keep up with servicing clients virtually. Legacy banking systems have always stilted the digitisation of financial services, but the pandemic thrust this issue into the limelight. Fintech firms, which focus intently on digital and mobile services, knew it was only a matter of time before financial institutions’ reliance was to increase at an unprecedented rate.

For years, fintechs have been called upon by traditional players to find solutions to problems borne from those clunky legacy systems, like manual completion of account changes and money transfers. Now it is the demand for these services to be online coupled with the need for financial services firms to cut costs, since Covid-19 hit the economy.

Covid-19 has catalysed the urgent need to bring digital transformation to a wider pool of financial services businesses. Customers now have even higher expectations of larger institutions, demanding that they keep up with what the younger and more nimble challengers have to offer. Industry leaders realise that they must transform their businesses as soon as possible, by streamlining and digitising operations to compete and, ultimately, improve services for their customers.

The race for digital acceleration began far before the recent pandemic – in fact, following the 2008 financial crisis is likely more accurate. Since the credit crunch, there has been a wave of new fintech firms, full of young, bright techies looking to be the next big thing. Fintechs have marketed themselves hard at big conferences and expos or by hosting ‘hackathons’, trying to prove themselves as the fastest, most innovative or the most vital to the future of the industry.

However, even during this period where accelerating innovation in online financial services and legacy systems is crucial, the conditions brought about by the pandemic have not been conducive to this much-needed transformation.

The second issue, which again was clear far before the pandemic, is that fact that no matter how nimble or clever the fintechs’ solutions are, it is still hard to implement the solutions seamlessly, as the sector is highly fragmented with banks using extremely outdated systems populated with vast amounts of data.

With the significance of the pandemic becoming more and more clear, and the need for better digital products and services becoming more crucial to financial services firms and consumers by the day, the industry has finally come together to provide a solution.

The TISAtech project was launched last month by The Investing and Saving Alliance (TISA), a membership organisation in the UK with more than 200 leading financial institutions as members. TISA asked The Disruption House, a specialist benchmarking and data analytics business, to create a clearing house platform for the industry to help it more effectively integrate new financial technology. The project aims to enhance products and services while reducing friction and ultimately lowering costs which are passed on to the customers.

With nearly 4,000 fintechs from around the world participating, it will be the world’s largest marketplace dedicated to Open Finance, Savings, and Investment.

Not only will it provide a ‘matchmaking’ service between financial institutions an fintechs, it will also host a sandbox environment. Financial institutions can pose real problems with real data and the fintechs are given the space to race to the bottom – to find the most constructive, cost-effective solution.

Yes, there are other marketplaces, but they all seem to struggle to achieve a return on investment. There is a genuine need for the ‘Trivago’ of financial technology – a one stop shop, run by an independent body, which can do more than just matchmaking. It needs to go above and beyond to encompass the sandboxing, assessments, profiling of fintechs to separate the wheat from the chaff, and provide a space for true collaboration.

The pandemic has taught us that we are more effective if we work together. We need mass support and collaboration to find solutions to problems. Businesses and industries are no different. If fintechs and financial institutions can work together, there is a real chance that we can start to lessen the economic hit for many businesses and consumers by lowering costs and streamlining better services and products. And even if it is just making it that little bit easier to manage personal finances from home when fighting with your children for the Wi-Fi, we are making a difference.

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What to Know Before You Expand Across Borders



What to Know Before You Expand Across Borders 6

By Sean King, Director of International Tax at McGuire Sponsel

The American retail giant, Target Corporation, has a market cap of $64 billion and access to seemingly limitless resources and advisors. So, when the company engaged in its first global expansion, how could anything possibly go wrong?

Less than two years after opening its first Canadian store in 2013, Target shut down all133 Canadian locations and terminated more than 17,000 Canadian employees.

Expansion of an operation to another country can create unique challenges that may impact the financial viability of the entire enterprise. If Target Corporation can colossally fail in its expansion to Canada, how might Mom ‘N’ Pop LLC fare when expanding into Switzerland, Singapore, or Australia?

Successful global expansion requires an understanding of multilayered taxes, regulatory hurdles, employment laws, and cultural nuances. Fortunately, with the right guidance, global expansion can be both possible and profitable for businesses of any size.

Permanent establishment

Any company with global ambitions must first consider whether the company’s expansion outside of the U.S. will give rise to a taxable presence in the local country. In the cross-border context, a “permanent establishment” can be created in a local country when the enterprise reaches a certain level of activity, which is problematic because it exposes the U.S. multinational to taxation in the foreign country.

Foreign entity incorporation

To avoid permanent establishment risk, many U.S. multinationals choose to operate overseas through a formal corporate subsidiary, which reduces the company’s foreign income tax exposure, though it may result in an additional level of foreign income tax on the subsidiary’s earnings. In most jurisdictions, multinationals can operate their business in the foreign country as a branch, a pass through (e.g., partnership,) or a corporation.

As a branch, the U.S. multinational does not create a subsidiary in the foreign country. It holds assets, employees, and bank accounts under its own name. With a pass through, the U.S. multinational creates a separate entity in the foreign country that is treated as a partnership under the tax law of the foreign country but not necessarily as a partnership under U.S. tax law.

U.S. multinationals can also create corporate subsidiaries in the foreign country treated as corporations under the tax law of both the foreign country and the U.S., with possibly two levels of income taxation in the foreign country plus U.S. income taxation of earnings repatriated to the U.S. as dividends.

Check-the-box planning

Under U.S. entity classification rules, certain types of entities can “check the box” to elect their classification to be taxed as a corporation with two levels of tax, a partnership with pass-through taxation, or even be disregarded for U.S. federal income tax purposes. The check the box election allows U.S. multinationals to engage in more effective global tax planning.

Toll charges, transfer pricing and treaties

When establishing a foreign corporate subsidiary, the U.S. multinational will likely need to transfer certain assets to the new entity to make it fully operational. However, in many cases, the U.S. multinational cannot perform the transfer without recognizing taxable income. In the international context, the IRS imposes certain outbound “toll charges” on the transfer of appreciated property to a foreign entity, which are usually provided for in IRC Section 367 and subject to various exceptions and nuances.

Instead, the U.S. multinational may prefer to license intellectual property to the foreign subsidiary for a fee rather than transfer the property outright. However, licensing requires the company and foreign subsidiary to adhere to transfer pricing rules, as dictated by IRC Section 482. The U.S. multinational and the foreign subsidiary must interact in an arms-length manner regarding pricing and economic terms. Furthermore, any such arrangement may attract withholding taxes when royalties are paid across a border.

Are you GILTI?

Certain U.S. multinationals opt to focus on deferring the income recognition at the U.S. level. In doing so, they simply leave overseas profits overseas and delay repatriating any of the earnings to the U.S.

Despite the general merits of this form of planning, U.S. multinationals will be subject to certain IRS anti-deferral mechanisms, commonly known as “Subpart F” and GILTI. Essentially, U.S. shareholders of certain foreign corporations are forced to recognize their pro rata share of certain types of income generated by these foreign entities at the time the income is earned instead of waiting until the foreign entity formally repatriates the income to the U.S.

The end goal

Essentially, all effective international tax planning boils down to treasury management. Effective and early tax planning can properly allow a company to better achieve its initial goal: profitability.

If global expansion is on the horizon for your company, consult a licensed professional for advice concerning your specific situation.

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