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Policy on Demand: Tax - and other challenges - for private equity sector - YouTube
Channel: PwC US
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(high intense music)
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- Welcome to policy on demand.
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I'm Sindhu Blume.
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executives are anticipating
tax policy changes this year
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and navigating those
changes will be challenging.
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How are these challenges being addressed
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in the private equity space?
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Joining me to talk about
that is Puneet Arora.
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Puneet, welcome.
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- Happy to be here Sindhu.
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- All right, so let's dig
into the future a little bit.
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So when you think about
private equity firms and, and
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and the portfolio companies
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what role does tax play in
their business decisions?
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Looking into the future?
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- That's I think it's, it's
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in the scope of this discussion
is certainly growing and
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and it's very encouraging
for us textbook reference.
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So if you talk to the business leaders
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they're all very optimistic
about their businesses
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and the growth with respect
to those businesses.
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However, it is not lost
on the business leaders
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that there is a lot of tax change
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which is likely to come
in the next few years.
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Not all of it is bad.
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However, the expectation
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with respect to increased
tax rates clearly
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is something that they want to take
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into account with respect to
their planning for the future.
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Now, when you think
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about what businesses
will have to do coming
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out of this post COVID world, frankly
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some of them are already
coming out of it or well
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on the way is they have to think
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about their businesses
differently location
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of their people, alternate supply chain.
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And so what that does is
when you, when you're looking
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at those scenarios, it
is important to make sure
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that you're thinking about
the tax sensitivities
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with respect to those
scenarios in real time.
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And so one thing which
you'll hear us say a lot
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about is scenario, you know
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doing the modeling with respect
to the scenario plannings.
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So when you think about,
when you try to view in what
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what is your tax posture today?
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What are the tax attributes?
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What are some of the things
that you are sensitive to today
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and what will the organization
look like in the future?
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You have to make sure
you are appropriately
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taking this into account.
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There's also the aspect
of when you go and locate
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in a particular jurisdiction,
that's separate, you know
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particularly jurisdiction where
there's a large unemployment
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and a business makes a decision
that they would want to move
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in that jurisdiction, not only
to encourage employment, but
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that it seems to be a place
where they could get a lot
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of good talent to grow their
business in the future.
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It's important to understand what are some
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of the local incentives
potentially that are available
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to themselves as a business and to
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to the people that would
be part of that business
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or the employees that they
will have in the future.
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So you put all this together
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and then you sort of look
at and say, what is the
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what is the tax plan look like today?
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And what is it likely to
look like in the future?
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Obviously, multiple levers, not all
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of them are likely to come
into play, but there are
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that's where the scenario planning
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and modeling becomes
extremely important to
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make some really good, well
thought out business decisions
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and what you often referred
to as no regrets planning.
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- So puneet, I want to get
a little bit more granular
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in terms of what companies are doing
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and what steps they can take.
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Can you talk about that a little bit?
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- Sure. As I mentioned
there, just when I talk
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about scenario planning,
it's all about the modeling.
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So you, when you do the modeling
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you look at each of the levers and say
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what impact does it have with
respect to your projected sort
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of returns with respect to
your business decisions?
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And so it, what it does is it
helps you think that too well
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and you can calibrate
your thinking based on
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and your projected returns
based on what those
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if those scenarios were
to come, come to fruition
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what that could mean.
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So it's just better,
better informed decisions.
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And it actually allows
tax to play a more active
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strategic role in, in those
decision-making processes
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as opposed to, you know,
at the back end looking at
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and looking at what the
potential impact is going to be.
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So the modeling piece is what
I would reinforce being the
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being the real driver and frankly
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a key part of the no regrets planning.
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- Okay. So modeling a key component.
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Now, going back to your points
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.about supply chain
and location of people.
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Those have been, you know,
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disrupted over the past year or so.
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So as businesses are moving forward
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and working on those issues, what are one
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or two things that you
are seeing companies do
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or would recommend companies do?
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- Yeah, I think the one
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or two things which
companies need to think
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about is as they're looking
to replace, you know, or
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or grow or replace a supply chain
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it's very important to think about
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what does it look like holistically.
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And, and are you able to access
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any incentives that are being offered,
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you know, by a local government?
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Are you, when you do that
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does that look a whole lot different
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in terms of your footprint?
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What, what, what does it mean
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with respect to your
intellectual property?
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And so the, one of the key
things is when you look at it
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not to look at these
extensions or these things as a
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as a standalone, but what is the, what
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how does it tie back
into the organization?
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And what you've seen is a lot
of the discussions that are
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are not only what do you do
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in coming out of this post
COVID world to grow, but what
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how does that impact the
rest of the organization?
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So that's would be one thing.
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The other piece of it is
thinking about your employees
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and where will they work
and what will they do
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and what is the impact with
respect to operationally
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but also from a tax footprint perspective
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because everyone's talking
about the employee location
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whether it's, you know, a hybrid model
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whether it's multiple offices,
whether it's going back
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to an office in a completely
different location.
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So it's very important
to see what the impact
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of that new employee model,
the technology overplay
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because clearly that distinction is a lot
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of the things are being automated.
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And so where is the
technology being developed?
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What does that do for
the overall function?
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So those need to be considered.
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So I'd say the two key
things are making sure
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that your incentives you've thought
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about those and understand those well.
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And then the other piece
of it is that, you know
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the people and the technology piece
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how does that fit in, in the future?
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And what does it mean
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with respect to the footprint
of the organization?
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- All right, penny, it's great to see you
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and have you back on the
show. Thank you so much.
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- Pleasure Sindhu and thank you.
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- And thank you as always
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to our viewers for
spending this time with us.
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We'll see you next time.
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(intensity music)
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