Depending on where you are in the world, you’ll find that nations take vastly different approaches to banking and finance. For example, the United States plays host to about 5,338 commercial banks — in Canada, there are only 72! The approach each of these countries takes in maintaining their economic stability varies greatly. More so than just having different colored money!
Most Americans do have a bank account open with one of these banks, though 7.7% or so of the population doesn’t bank at all or use an alternative (like carrying cash).
Just recently, there have been a lot of shake-ups to the world’s financial institutions. Cables and documents being called the “Panama Papers” allegedly prove multiple world leaders stored money in Panama.
While no American businesses have been named or implied in the leaks, here’s an example of how a business operating on our soil might benefit from engaging in those same activities.
When businesses want to get an accurate understanding of their worth and their value, they might contact a business valuation firm. A business valuation company typically comes in at the request of a business, and measures its assets. Not only its physical assets but its prospective ones, too. It does this by carefully applying algorithms to a business’s financial data and producing a figure that companies can use to gauge their worth. This formula, in turn, affects their budgets and purchasing power and, most importantly for this example, could affect how much tax they have to pay.
Taxes are proportional. In the United States, the more money you make (according to the law, anyway), the more money you’ll pay in taxes. If there were a way to limit the amount of taxes you pay out, your business would have more money in its budget for other things. By and large, these entities likely tricked their business valuation experts by storing money in Panamanian accounts — allowing them to save money. When a business valuation firm came in to perform the calculations on these businesses, it’s likely they produced a lower number than what they initially would have if the businesses had all their money stored in America.
If anyone you know may be interested in learning more about the recent findings in Panama, or may benefit from learning more about business valuation services, feel free to share the above with them.