Comment: The new political morality

What modern US Presidents have learnt from the social media age is that both well-drafted laws and brute force have less political clout than fighting moral turpitude – and that moral life is not built on the continuum of right and wrong, but on a twitter-fed culture of inclusion and exclusion. Being seen to be good courageously in a secular way is a new inclusive path to a ‘command morality’ and seizing the high ground that other regimes have so much under-rated. It is also great for the tax exchequer too. Enter left – US Executive Order 13818.

This document came into force at the end of December 2017 and builds on the GLOMAG initiative introduced by President Obama. It applies to all individuals who, and companies that, have been involved in human rights abuses or corruption anywhere in the world – plus all those who have, in any way, dealt with them. It now applies to 52 individuals and entities that collectively have huge networks of business interests covering such crimes as widescale traffic in illegal arms to war zones, forced removal of human organs and corrupt mining deals in the Congo. It also applies to current or former government officials, most commonly found in rogue or failed states.

No court action is necessary for inclusion on the GLOMAG list and the consequences of inclusion on it include the blocking of assets, visa blacklisting and a ban on all transactions by US companies, citizens and residents with the designated persons or entities.

Further concern for foreign companies that have entities in the USA arises from recent tax reforms. Foreign companies could well face a significant increase in tax liability due to new anti-avoidance measures. This is linked to measures countering ”base erosion”, “earnings stripping” and tax loopholes previously open to “expatriated entities”. Transfer pricing rules are being tightened and interest paid to entities with a 25%+ equity stake held abroad maybe subject to base erosion and anti-abuse tax penalties.The treatment of third-party debt is also likely to require careful attention when calculating US tax liability.

Now is the time for multinationals to get to know their suppliers and customers and the real use made of their goods and services. It is also necessary to review all business and financial interests in the USA and to consider alternative trading arrangements.

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