I read a fascinating article in the Wall Street Journal the other day which suggested that my region could broadly be thought of as two separate entities.
The lure of China’s less well-known cities and the opportunities they present has been picking up speed for years, along with their impressive growth. In fact, while they are often described as ‘second-tier’ cities, many are in fact now wealthier than their ‘first-tier’ counterparts.
John Geldart has spent a lot of time in China over recent years. It is an amazing country which fascinates and surprises him every time he returns, but perhaps no more so than over the past few months when he has been lucky enough to interview the chairmen of some of its most dynamic companies.
Depending on their level of business maturity, the challenge for tech companies is slightly different – but the principles remain same: grow or die. To be the next billion-dollar technology brand, CEOs need to figure out how to scale and normalise faster than their rivals – without compromising the DNA of their rivals Protecting the core The good news is that cloud and on-demand enterprise servies are making expansion cheaper and less complex that ever before. Scaling tech companies can use systematising tools like Jira to track issues and manage dispersed software builds. Meanwhile, collaboration tools like Yammer, Skype and Base camp allow for close teamwork between decentralised teams.
Today, it can be more or less instantaneous – creating a new set of opportunities and threats. Digital platforms allow companies to build and scale using teams based anywhere in the world. As a result tech companies are going global from day one. A new wave of support services is also helping tech firms expand across borders. For example in order to manage the complexity of operating across borders, tech companies are increasingly outsourcing back office functions such as tax, compliance, legal, and HR. Tech companies can simply 'switch-on' a back-office team as they enter new jurisdictions.
The way in which companies markets and sells its services can also have tax implications. Therefore, one thing is clear – tax matters, and ambitious tech companies need to develop a tax strategy that can keep pace with their growth aspirations. Shifts in attitudes and increased scrutiny The climate for what is considered acceptable in tax planning has shifted considerably over recent years. Technology firms – especially large multinationals – have suffered their fair share of criticism. Negative PR can hurt technology giants, but it has an even greater impact on firms still expanding and building their reputations. And tech companies are not just risking their reputations when it comes to tax. The OECD's base erosion and profit shifting (BEPS) project is creating new rules to outlaw and penalise artificial tax avoidance strategies. The project aims to address inconsistencies between different jurisdictions in their approach towards transfer pricing. The first action in its plan is to "address the tax challenges of the digital economy" – including where and how to tax new digitally enabled business models.
Stefano Salvadeo was interviewed on Focus Economia di Radio 24 recently to discuss some positive indicators regarding M&A activity in Italy.
Reviewing the Q2 International Business Report (IBR[1]) results, I was pleased to see some good news for construction & real estate companies: Profitability expectations around the world are up. However, my optimism is tempered somewhat by recent news from China and it will be interesting to see how businesses react in Q3.
