If you've been to one of this year's assortment of trade shows, user conferences or IRS Forums, you can't help but be impressed with the competence and talent among the vendors purveying their software, hardware and integrated solutions.

Even in a maturing industry such as tax preparation, companies are building on past success, adding bells and whistles and advancing new technology to make life easier for the professional. The reason? Competition. It's what keeps us all honest. And it's why so many world and Olympic records were set at the Beijing games.

Yet in the tax and governance world there's a lot of anti-competitive behavior because legislators and bureaucrats think that tax revenue is part of a zero sum game: by chasing every dollar and closing every "loophole," they'll raise enough revenue to pay for their pet projects and other pork. They've never heard of killing the goose that laid the golden egg. Add to this the SOX tax (the tremendous cost of complying with its requirements), and you get an ecosystem particularly hostile to business in general and innovative startups in particular.

The effects are real. Last quarter was the first in 30 years that not a single company backed by venture capital went public in the U.S., according to The Wall Street Journal. There are many reasons for this, but tax and overregulation are among them.

Even the Organization for Economic Cooperation and Development, for years at odds with the U.S. for its favorable attitudes toward U.S. firms selling overseas, sees the point. It just issued a scathing criticism of Finland for driving its best and brightest individuals overseas due to Finland's high taxes, resulting in less competitiveness in the IT sector. And Brussels, the seat of much of the European Union bureaucracy, has come up with a novel idea to attract investment to Belgium: the notional interest deduction.

The idea of the notional interest deduction is to allow companies that use their own equity for investments to deduct a fictitious interest amount from their tax base. The principle is to reduce tax discrimination between debt financing and equity financing, in effect lowering the corporate tax rate on all companies and strengthening their financial position by increasing their equity. And, importantly, it applies to Belgian branches of foreign companies, in addition to Belgian companies.

The recently created OFP - organization for financing pensions - is another example of Belgium moving aggressively to attract foreign funding. It is a separate legal entity that can be created simply by adopting bylaws in compliance with a governance structure that divides operational and oversight responsibilities.

There is no requirement that the employer be located in Belgium, nor even that at least one pension plan operated by the OFP apply to Belgian workers. A multinational group with no company basis in Belgium may nevertheless set up a pan-European or international pension fund in Belgium.

The point is that making it harder to do business results in a loss of business and less revenue in the long run, while enlightened tax policy and governance requirements result in more business and more revenue. After all, we're competing with the rest of the world, not just ourselves.


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