Taxes and Regs and Activists! Oh My!

August 18, 2014

By Ted Howard

This month’s issue features a few of the “scary noises in the woods” topics that treasurers face today. They include, as the title suggests, taxes, regulations and shareholder activists. But wedged in between is the happier and informative tale of Itron’s global treasury transformation.

Taxes. Looking for a law that makes corporations spend millions on new compliance initiatives (while often pulling the plug on growth activities), encourages citizens in record numbers to quit their country, and drives others into shadow banking services, or makes them outright tax cheats by the mere fact of living abroad? Well, let us present to you FATCA, the IRS’s Foreign Account Tax Compliance Act; and just for good measure, let’s throw in FBAR or Foreign Bank and Financial Accounts, equally onerous.

“Without a doubt, these two tax laws will be the most time-consuming compliance requests ever, as they will add increased monitoring and reporting requirements to global treasury organizations,” writes contributing editor and Peer Group Leader Geri Westphal in this month’s lead story, “Two Tax Rules, a Barrage of Unintended Consequences.” Indeed, the two new tax laws likely represent the most ambitious tax- and personal data-collection strategy in financial history. And on the heels of hundreds of other new rules introduced over the past several, these new tax laws could help to hobble the global economy’s recovery.

Regs. In addition to taxes, this month’s iTreasurer also discusses how new money-market fund rules will affect treasurers as well as the changing role of activist investors.

In “Money Fund Rules’ Biggest Losers,” and in “Fitch: MMF Rules a Headache for Treasurers,” iTreasurer discusses the Securities and Exchange Committee late July vote to approve new money-market fund rules. “In the process, they ostensibly choose who wins and who loses in the sector” and, according to Fitch, “fundamentally change cash management for corporate treasurers.” One of the main problems is that there are no viable replacements for MMFs, which to most treasurers are “set and forget it”-type instruments. A dollar in is a dollar out and now that net asset values will move up and down (along with added gates and fees), they’re not the simple-to-use asset they once were.

Activists. Also, this month we discuss shareholder activism and how companies can position themselves in “Activists Moving from Foes to Friends.”

“From a treasury standpoint,” says Chet Bozdog of Bank of America Merrill Lynch, “having the right capital structure in place… can limit the chances an activist comes in. This can help ward off or delay an activist attack. However, companies can benefit from a good activist, one who isn’t in it for the quick buck. And as the trend grows, many new entrants are entering the activist sphere, as there is little stigma to making a public statement for many funds.”

On a happier note. Finally, in “Itron’s Journey to World Class,” Geri Westphal explains how the provider of technology solutions for the utility industry made its visibility problems go away with a complex but ultimately successful transformation of its global treasury function. Prior to this it had little or no visibility to account balances and transactions, and faced significant FX exposures in 30-plus currencies with no tracking for FX management.

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