Question

Suppose that you are the treasurer of a small but rapidly growing multinational firm. What argument would you use to convince the Board of Directors that tax considerations must be incorporated in the firm's overall strategy?

Answer 1

Tax consideration must be incorporated in firm's overall strategy because there are several tax incentives which are provided by different countries to growing multinational companies in order to benefit each other.

first of all we can consider the capital structure in which If more of the debt over equity is managed properly , it'll provide the benefit of interest rate tax shield and thus maximizing the overall profits as well as growth. The only consideration for that will be to beat the cost of debt by the return on capital.

While investing in other countries one should be collaborating with the domestic companies in order to gain from domestic tax structure and it will reduce the cost significantly.

For example if a US company who is a manufacturer and sets up plan in India, depreciation charged on assets for many years are tax deductible as well as various type of tax incentive are provided in order to gain from foreign direct investment.

So it is very important to consider tax implications while consideration of investment because it will multifold the growth prospects of a growing company.