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Equity Plans and the Tax Man Part II

Last month I wrote about the increasing practice of tax regimes around the world looking for new sources of revenue. Well, following on that theme, there was a very interesting article in today’s Wall Street Journal describing how the Lithuanian government has found a somewhat novel way to collect additional tax revenues – via Google Street View.

 

Tax-on-Equity-Plans

As the tile of the article implies – “In Lithuania, the Tax Man Cometh Right After the Google Car Passeth” – The Lithuanian taxing authorities have realized it is relatively easy to compare the Google street views of homes and edifices that recently may have been built to the tax records for any given address. In this way, they have used a free technology to very cost-effectively go after potential sources of unclaimed wealth.

Whilst this doesn’t relate directly to equity compensation, I think we will see very shortly the day when other new technologies will be leveraged by taxing authorities to target previously overlooked sources of revenue. In particular, with the overwhelming majority of citizens in developed countries carrying some sort of smart phone, it is only a matter of time before taxing authorities will develop a methodology to track or audit mobile employees’ business travel and try to leverage that data to determine trailing tax liabilities over the vesting period of an award.

Interestingly, this will not only be limited to international travel and employee assignments – US State taxing authorities are similarly placing greater scrutiny on the Stats-to-State business travel of senior executives, and will likely begin to require a detailed accounting of business travel to try to exact their representative share of the tax pie due upon the vesting of large awards.

As the example from my ancestral homeland (Lithuania) has demonstrated, even governments and tax bureaucracies will eventually find ways to leverage technology to make their collection and enforcement activities that much more efficacious. In some respects, this makes me yearn for a simpler time before smart phones and GPS tracking, but with almost any advance in technology, it is impossible to try to “put the genie back in the bottle” – we just need to remember that “big brother” is always watching, and to keep trying to develop reporting and tracking processes to stay one step ahead of the tax man when managing our global equity award plans.

John Bagdonas

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