Dagens industri’s columnist, Henrik Mitelman, was one of the speakers at PwC’s Entrepreneurs Evening and presented his own, personal views of the current economic trends having the strongest impact on entrepreneur led companies. Here are some of his thoughts in the context of corporate and company owners’ taxation.
Digitalisation. Almost everything is getting cheaper and is becoming more efficient. Many companies have an enormous potential for cost savings.
Entrepreneurs see possibilities! The global market is growing and global trade increases each year. India, China, Vietnam and many other countries are progressing by leaps and bounds. The Swedish ideal amongst the young, that is, balanced work and leisure time and security of employment are being challenged by well-educated individuals with an entirely different type of ambition than seen in Sweden and Europe, that is, to earn money!
Low interest rates and cheap money. Be careful! I Sweden now has a household debt level higher than what Spain had prior to its real estate crash. “A 12 year effective interest rate of -0.76% implies that just about everything is profitable”. This increases the risk in the domestic economy and in all types of companies, in spite of the positive state of the global economy. “Minus interest rates are dangerous.”
Increased anxiety. The real danger is in the new political anxiety. For example, we do not dare to propose a functioning tax system for employee stock options for start-ups and growth companies, in spite of the fact that competing countries have such systems and in spite of the fact that start-ups and growth companies are taxed at almost 70 percent in Sweden.
Women are taking over! Generally speaking, women are seen to be better educated. This applies in many countries and will perhaps impact employment and the generational shift.
Other questions for entrepreneurs
Patrik Hedelin, co-founder of the former company, Boo.com, and active today as an investor in e-commerce companies.
E-commerce is growing very rapidly. This applies to both newly started e-commerce companies, as well as to existing companies building up their e-commerce operations. Digitalisation of business operations is on the rise.
Elisabeth Thand Ringqvist, Chairman, Swedish Private Equity & Venture Capital Association, SVCA.
Correct structure. An entrepreneur seeking equity from business angels and risk capital funds has to be open, transparent and also prepared to share the leadership of the company. These individuals can, then, complement each other and work together to increase value.
Lars Backsell, Recipharm AB and Swedish Entrepreneurship Forum.
There is even room on the stock exchange for entrepreneurs! Many investors want to see a clear entrepreneurial ownership in the companies in which they invest. With the right organization of the operations, this can be accomplished!
Relationship between economic trends and taxes?
- Companies and owners should have a tax strategy with a clear view of when and how the profits will be distributed. It is preferable that this strategy is anchored at Board level. The same goes for ownership issues, which are increasingly more complicated, and, in many cases, moral issues also come to the fore in this context.
- Transfer pricing issues within corporate tax. Small and medium-sized companies also risk paying more taxes in the manufacturing and sales countries involved in their operations. This increases the risk of double taxation on profits. There are new and strong currents underway in the sea of international corporate taxation.
- The increase of tax on distributions and capital gains for owners of closely held companies is expected to take place during 2018. Should owners, who have the possibility, distribute a greater amount of profits until that point in time? This applies particularly to owners who have saved their low-taxed distributions.
- Increased digitalisation and e-commerce challenges corporate tax. A number of countries have introduced consumer taxes in certain situations. We will discuss this in greater detail during our tax seminars in Almedalen in the summer.
Overall, current economic trends primarily affect the business opportunities available to entrepreneurs. Nevertheless, increased profits also provide possibilities to plan, over time, for both the company’s taxes and for personal taxes.
There is a red thread between economic trends and taxation of entrepreneurs, both as regards corporate tax and personal tax for owners.
Consequently, PwC recommends that companies and owners have a clear tax strategy. This requirement of a strategy has become all the more obvious during that last one to two years.
The most important issue just now within taxation is how international tax trends affect corporate tax, provided one has international operations. At home, it is of interest to see if in the spring of 2017 there will be a reduction in corporate tax and a limitation on the right of deduction of interest expenses.
For owners of closely held companies, it is the tax increases on dividends and capital gains currently in the pipeline, which are of importance. However, for this to apply there needs to be profits in the company; hence, the clear link with economic trends.
Hans Peter Larsson and Peter Hellqvist
010-213 31 01
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