Catarina's World

It’s not a coincidence that most successful Western corporations were founded last century. Then it was still possible to build up a highly profitable company in the West. Nowadays however, that’s easier said than done. Western tax authorities, led by Sweden followed by America, are tightening any loopholes there are.

Multinational corporations have already made arrangements to pay as little as possible to the taxman in the West. So they will not be much, if at all, affected by this. However the vast majority of companies are small and medium sized. And for them it isn't always possible to do what the big players do.

In the developing world however, companies can still do what used to be done here which gives them the upper hand. Cannot understand how tax authorities have been allowed, actually instructed, by politicians to hand out all the aces to competitors overseas? You have to play with the cards you have and with the odds stacked against them, Western companies have their hands tied.

Private sector companies generate the main part of taxes and fees that pay for government and the public sector. Hence cannot understand how Western governments can implement taxation laws that slowly but surely make Western corporations unable to compete on the global market? Where is the money going to come from to fund Western authorities? Obviously the problem is that politicians main priority is to be re-elected. They hence take opportunistic decisions to gain short term benefits. But how about keeping the West competitive in the long run? A lot of famous Western brands, such as Volvo, Rolls Royce and Range Rover, have already been sold to the developing world.

Where is the money going to come from to keep the West wealthy when companies are being taxed out of business? Tax authorities in the West are getting more and more militant and EU and US politicians are cooperating to make sure they squeeze as much taxes as possible out of companies. The justice system in Sweden is hence so twisted you are actually better of murdering someone than committing severe economic crimes since your jail sentence will be shorter.

The jobless recovery illustrates the tax problem very well. Many jobs lost will not be replaced, more likely outsourced or moved overseas. Most manufacturing has already moved to the developing world, not because companies wanted to move, but had to in order to be competitive. Fair enough since most Americans and Europeans are not keen on such jobs anyway. Catch is that all countries have a population of everything from brilliant to stupid people. What are Westerners with a low IQ going to do in the future? Non-skilled jobs are in the developing world but how many labourers in the West are prepared to start working in, say, a factory in China? Or Africa for that matter, because some experts believe manufacturing will start moving there since they provide cheaper labour than Asia.

Multinational corporations have already made arrangements to pay as little as possible to the taxman in the West. So they will not be much, if at all, affected by this. However the vast majority of companies are small and medium sized. And for them it isn’t always possible to do what the big players do. So weather they like it or not, they have to start thinking about moving their company head quarters to other parts of the world. Or, like IKEA, transfer ownership to a trust abroad.

Unfortunately politicians are not the do-gooders they ideally should be. Politics is a profession. And like the corporate world they are looking for short term gains. That companies do is one thing, but surely US and European politicians should have the long term welfare of their own countries at heart? Throughout history empires come and go. And the US and European empires are no exceptions. We all know that China, India and Saudi Arabia/the Gulf will take over. But what I cannot understand is why Western politicians are actually speeding up the end of their empires? Wouldn’t it be better to try to remain the leading powers for as long as possible by keeping the good cards? Apparently not since the West seems to be undermining its strenght from within without taking into account what this will do to future generations.

(photo: 427 – flickr)