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1、 602 JOURNAL OF INTERNATIONAL BUSINESS STUDIES， THIRD QUARTER 1993 Taxes and Business Strategy: A Global Planning Approach by Myron S. Scholes and Mark A. Wolfson Englewood Cliffs, New Jersey: Prentice Hall, 1992 Reviewed by John E. Karayan California State Polytechnic University, Pomona Every once
2、in a while a book comes along that defines a discipline for students who are not practitioners. Samuelson in Economics comes to mind， as does Thomas in Calculus. Scholes and Wolfson have written such a book. Taxes and Business Strategy: A Global Planning Approach defines international taxation (inde
3、ed, taxation in general) for both students of management and management scholars. And it could not come at a better time, for an understanding of international taxes has become increasingly important in recent years, for at least two reasons. First, taxes on the international scene are more complica
4、ted than domestic taxes. Second, tax planning can take advantage of differential tax rates and systems through cross-border transfers of property, personnel and profits to produce competitive benefits. Therefore as taxes become more important to international businesses, and as more businesses becom
5、e international in scope, managers and management scholars increasingly will need to understand international taxation. Taxes and Business Strategy satisfies this need, but in a different way from the traditional tax scholars article or tax professionals treatise. These typically approach the dissem
6、ination of tax information with a focus on extant tax rules and regulations. Scholes and Wolfson take a different tack; their book develops a conceptual framework for contemplating how taxes affect business decisionmaking. The significance of their work extends beyond that of the economic impact of
7、taxation. Instead, the framework can be generalized to delineate the impact of all regulatory costs on business decisionmaking, taxation being merely one of the more important, more obvious, and more easily defined regulatory costs. By explaining how tax laws evolve in response to economic， social，
8、and political concernsand how tax laws evolve in reaction to taxpayers9 entrepreneurial efforts to minimize their own tax burdensthe authors have uncovered the “deep structure” to the process of integrating tax considerations into business decisions. The authors amply illustrate their explanations w
9、ith an impressive body of econometric research that they and their disciples have generated over the past decade. More importantly, this research is complemented by a surprisingly simple, yet quite original, set of valuation models for investments that suffer differential taxation. Among the benefit
10、s of this “double barrel” approach is that the framework provides a guide to effective tax planning, both from a technical sensethat is, what the actual rules are that apply to a situation, and a financial sense一 that is, what the actual impact on asset values is, depending on which rules actually a
11、pply to a situation. Surprisingly, Scholes and Wolfson conclude Palgrave Macmillan Journals is collaborating with JSTOR to digitize, preserve, and extend access to Journal of International Business Studies www.jstor.org BOOK REVIEWS 603 that normative tax planning (i.e., what tax practitioners ought
12、 to be doing) often is at odds with how tax practitioners in accounting and law firms actually approach tax problems. For example, most practitioners focus on minimizing their clients9 taxes. However, the authors demonstrate that this is short-sighted and misguided. Instead， they recommend that tax
13、planners focus on a global approach， which considers the worldwide tax burden of all stakeholders and parties to transactions rather than just a single tax9s burden on only one party. And all associated costssuch as both the administrative and the opportunity costs of implementationshould be factore
14、d into the decision process. That is, they assert the proper goal of tax planning is not tax minimization, but instead optimization of tax burdens. Although this is not a new idea to a select few of very successful tax planners, it is a rare tax practitioneror clientwho actually sees things this way
15、. Scholes and Wolfson also argue for a multilateral approach, with the idea that lowering one partys taxes in a transaction increases the expected, after-tax return, which in turn can be “sold” to the other parties to the transaction. In their view, the contracting process is not a zero sum game. In
16、stead, tax savings can be passed along implicitly in the fomx of lower required returns. The concept of buying tax benefits is not new and indeed was the motivation for the short-lived American “safe harbor lease” deals of the early 1980s. However, explicitly selling tax benefits traditionally has b
17、een held in low repute by taxing authorities and politicians. Nevertheless, Scholes and Wolfson demonstrate that this is precisely what happens in everyday life: tax advantages are translated into lower before-tax rates of return, which in turn are translated into asset prices. This suggests another
18、 crucial implication, the importance of implicit (i.e., hidden) taxes, which the authors address. Part of governments response to complaints that the rich are not paying their taxes, is a change in tax policy. But unlike the 1960s, when the targets were American millionaires, and the 1980s， when the
19、 target was the American defense industry， the prime targets for the 1990s will be rich foreign corporations (e.g., Japanese auto and electronics companies). These taxpayers all have one thing in common: their explicit payments of taxes to the U.S. government are low relative to their gross receipts
20、. But, as Scholes and Wolfson so adeptly illustrate, this does not mean that they are not shouldering their fair share of taxes, for tax burdens can be implicit as well as explicit. Indeed, this may explain one of the great puzzles of financial economics: If debt-intensive capital structure is highl
21、y tax advantaged (as it is in the U.S.), why are these substantial businesses that have virtually no debt on their balance sheets? To Scholes and Wolfson, the answer is simple. Debt has value as a tax planning technique, but so do other techniques. Among these is leasing equipment to customers. Alth
22、ough not explicitly taking advantage of debt as a tax shelter, extensive leasing does so implicitly. 604 JOURNAL OF INTERNATIONAL BUSINESS STUDIES, THIRD QUARTER 1993 Another implication (which the authors do not develop in any significant way) is that non-tax factors must be considered when develop
23、ing tax strategies. For example, one must consider the effect of a tax plan on management incentives, transactions costs for resulting sales, and other costs. That is why the touchstone of tax planning should be optimizing the tax burden, rather than minimizing it. As alluded to above, this rarely i
24、s stated as an explicit goal of tax practitioners, but often is pursued by astute individual clients of these practitioners. (Likewise, these clients also look at the trade-offs of the benefits of a particular tax strategy against the cost of its implementation.) The book is destined for a multiplic
25、ity of uses. First, it is an ideal text for courses on the impact on tax and other regulatory costs on business decisions. It should be noted again that the book is not targeted at tax professionals; instead it is directed to managers without particular expertise in tax practice. As such, it also se
26、rves as a fine supplement in courses in business strategy. The cases that pepper the book are excellent for team study, requiring as they do the application of technical knowledge in an area where the vast majority of students have no professional experience, but a good deal of personal experience.
27、As the cases require both quantitative and qualitative analysis, they are ideal for small-group discussion and decisionmaking. Finally, the book should be required reading for management scholars interested in how business decisions are made, and how they should be made. This is particularly the cas
28、e for those scholars who are interested in international businesses, where taxes manifestly play such an important part. World Investment Report 1992: Transnational Corporations as Engines of Growth New York: United Nations, 1992 Reviewed by Donald J. Lecraw Western Business School， University of We
29、stern Ontario A book review should answer two questions for readers, What is the book about? and, Is it worth my money to buy it and my time to read it? For World Investment Report 1992, the answer to the second question is easy. For anyone with a research， teaching, or public policy interest in int
30、ernational business, the multinational enterprise, economic development, or international trade, World Investment Report 1992 is must reading and a must for the personal library. This conclusion mirrors that of Sagafi-nejad JIBS, 1991, 4:749, the World Investment Report 1991 should be required readi
31、ng in all international business courses.” The research and publication program of this volumes corporate home， the Transnational Corporations and Management Division (TCMD), Department of Economic and Social Development, United Nations (formerly the United Nations Centre on Transnational Corporations, UNCTC) has made the