Deniz Caglar, John Ranke [Archive.org URL]

Although executives intuitively know that taxes are important to the company’s ultimate profitability (and income available to shareholders), they don’t often evaluate these costs as part of the restructuring effort. Rather, they treat taxes as a cost of compliance, after the major decisions are made. Consequently, they are likely either to create tax inefficiencies or to miss opportunities to put their companies in a better tax position than they had in under the old structure.

Why is such a seemingly straightforward concept so often missed? The answer is maddeningly simple: The people thinking about restructuring issues are often unconnected to the experts who can properly evaluate tax considerations in today’s complex tax environment. The first group focuses on their primary problem of how to restructure the company or a part of the company. Taxes are someone else’s problem after the fact, they assume, and will be optimized within the constraints of the newly restructured company.

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