Are you Experienced - by Identity Transduction Systems
Are you Experienced - by Identity Transduction Systems

The triumph of the virtual corporation

Dell’s (DELL) buyout is the latest in a series of firms leaving the public market. Since 1997, the number of American companies listed on stock markets has dropped by more than half, from more than 8,800 to roughly 4,100. Some firms leave the market due to mergers or going private (Dell), while many are delisted due to bankruptcy or liquidation (Circuit City, Borders, or Eastman Kodak). But Dell's buyout represents something bigger: The triumph of the virtual corporation.

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The End of the Information Frontier

The possibility now exists of capturing a cradle-to-grave record of everything a person says or does. No longer must a personal history be a partial picture. Technology has made it possible to record, process, store, and retrieve all the text, sounds and images that are required to paint a complete picture of an individual’s life.

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Addendum to Transfer Pricing

Just the tip of an offshore rig. "Transocean, shifted its headquarters for tax purposes to the Cayman Islands from Houston, though a vast majority of its executives still work in Houston. [T]hen, in 2008, for tax purposes, it moved its headquarters again, this time to Switzerland from the Cayman Islands." http://www.nytimes.com/2010/07/08/business/global/08ocean.html?hp Like transfer pricing, shifting corporate headquarters is part of…

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Transfer Pricing

Transfer pricing is an accounting practice employed by multinational companies to minimize their global tax obligation (see discussion of this topic in Virtual Organization). A company can book profits in low tax countries and claim expenses in high tax countries. Suppose, for example, a car manufacturer has plants in the US and Mexico and that the US tax rate is higher than that of Mexico. The US plant could buy some components from its sister plant in Mexico, paying a price (set by accountants at headquarters) above its own cost of production. This ploy would have the effect of reducing profits in the US (a high tax venue) and raising them in Mexico (a low tax venue) without changing the overall revenue of the company. The benefit is a lower tax bill. Thus, the company gets the best of both tax worlds with a simple accounting trick.

This practice is not new. Barnet and Muller documented it in Global Reach, nearly forty years ago. The current financial crisis is responsible for renewed interest in transfer pricing, because governments are desperately seeking to increase tax revenues. The New York Times reports that “the charity Christian Aid, which is concerned with the effect [of transfer pricing] on developing countries, estimated that governments lose $160 billion a year when companies working across borders misapply the rules” (NYT, Jan. 4, 2010). According to Bloomberg news “Transfer pricing lets companies such as Forest, Oracle Corp., Eli Lilly & Co. and Pfizer Inc., legally avoid some income taxes by converting sales in one country to profits in another — on paper only, and often in places where they have few employees or actual sales” (bloomberg.com, May 13, 2010).

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