In a comment on the dispute over Dubai’s DP World taking over operations at several important U.S. ports, experts at Aon Trade Credit have observed that there “is increasing evidence of countries selectively imposing burdensome and arbitrary regulations on western multinational corporations.”
While it’s still unclear what impact, if any, the fallout from the ports deal may ultimately have, it could also cause some problems
Bryan Squibb, managing director, Aon Trade Credit U.S., noted that in “the 70s and early 80s there was a trend toward governments’ privatizing a company’s assets. In those years, he says there were so many radical changes in leadership throughout the world that it was fashionable for the incoming government to blame the outgoing administration for that country’s problems. So the previous government’s business deals often came under fire. Oil and gas companies from the US and UK were frequent targets.”
Squibb also indicated that there’s evidence of a variation of that trend, which is now threatening some North American and European companies. “When countries arbitrarily impose these discriminatory taxes it’s a form of international blackmail. Multinationals have no recourse,” he continued. “We’ve seen arbitrary taxes imposed amounting to anywhere from 3-25 percent of a company’s revenues from that particular country. The taxes appear out of nowhere and the shareholder ultimately pays. It erodes the predictability of a company’s earnings.”
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