Page 11 - Strategic Tax Planning for Global Commerce & Investment

Strategic Tax Planning for Global Commerce and Investment

tax strategy and planning with operations, creates
opportunities for financial efficiencies and long term tax
savings. Conversely, not doing so can result in missed
opportunities and create unnecessary and potential significant
tax risks.

In short, globalization has caused operational models to evolve,
has made tax planning more complex and has created a need to
better align tax strategy and planning with corporate strategy
and operations. Thus, management responsible for overall
corporate strategy must be able to understand relevant tax
concepts and draw out the business implications. In today’s
complex business environment, management needs to
anticipate change and address business issues globally. This
include the need for a global tax strategy that is integral to
corporate strategy and tax planning that is better aligned with
operations and, aimed at achieving and sustaining a lower
worldwide effective tax rate (ETR).

Impact of Tax Strategy and Planning on Shareholder
Value

A Key determinant of shareholder value under current
corporate reporting guidelines is earnings per share (EPS). An
important element of EPS is tax. The net effect of having an
ETR of 30% to 40% is that any earnings resulting from internal
growth, acquisitions or other corporate initiatives are diluted
by 30% to 40%. Thus, it is clear that ETR as reported in MNEs
financial statement significantly impacts EPS and therefore has
a direct impact on the shareholder value. In order to have a
positive impact on EPS, however, tax savings must be
sustainable.

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