After reading so much about IMF, I decided to write my own IMF blog.

The International Monetary Fund (IMF) is an organization of 188 countries, for some it’s the devil for others the savior. By our book’s definition: “working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world”.

Recently IMF called for countries to work harder together on tax policies, as it finds increasingly pervasive cases of nations’ tax rules affecting each other. In a new paper, the IMF discusses tax issues like profit shifting – which has sparked outrage in Congress with cases involving Apple Inc. and Caterpillar Inc.

As we hear, read, and in my case experience, most multinational organizations use various ways to get around paying taxes, by maneuvering profits around the world for higher margins. As an example, PepsiCo has about 600 legal entities designed to move money around, establish transactions through entities that are established in countries like Ireland, Bermuda and Luxemburg to minimize taxes, fees associated with doing business in various countries, and foreign exchange rate impacts.

These multinational organizations serves as foreign direct investors, bring development and much needed jobs to these countries. E.g. One of Google’s major business hub is located in Cork, Ireland. IMF doesn’t mention any company by name in its report, but acknowledges that these efforts can create what the fund calls “a collective inefficiency” in the global economy. Congress is moving on its own to stop such deals to close tax loopholes for companies that take U.S. jobs overseas.

Result? In my opinion, this is all legal, and I admire multinational companies that can learn and implement business practices like this. Government seems to be slow at taking steps to prevent these approaches. As Marketwatch calls it: “Major U.S. tax legislation is virtually certain to go nowhere as lawmakers gear up for November’s midterm elections.”

Erol Menda