Several SME’s have asked me if there are any financial incentives to exporting. Sometimes I forget the obvious. Let’s review the IC-DISC.
In 1971, the Babyboomerozoic college era, US Congress created a provision to the tax code called a DISC (a Domestic International Sales Corporation). The DISC was created to subsidize exports of US made goods through the income tax code. It was essentially a paper corporation with no activity. DISC’s were not subject to Federal Income Tax. The tax on the earnings of the DISC were at a reduced dividend tax rate. DISC’s were challenged by the European Community in 1981 as an export tax subsidy and the IC-DISC (Interest Charge-DISC) was created in 1984. The IC-DISC, however, is still alive and well and taxes the earning of the IC-DISC at the corporate dividend tax rate.
The IC-DISC is a separate tax exempt entity that is paid a commission on export sales of the related US corporate supplier organization. The IC-DISC pays no federal income tax on its commission income. When the IC-DISC distributes its income to its shareholders, it is taxed at the qualified dividend tax rate (much lower than the corporate income tax rate). It is still largely a paper entity at most companies.
The commission paid to the IC-DISC is the greater of:
An IC-DISC must:
Distributors that export US manufactured goods, including export management companies, are also eligible to enjoy IC-DISC benefits. Engineering or architectural services (for work generated domestically) charged on foreign construction projects are also eligible to enjoy IC-DISC benefits. Companies that manufacture components goods that are included in a product also quality for IC-DISC benefits. Thus, the applicability of the IC-DISC is pretty wide.
The IC-DISC was created by the Executive and Legislative branches to strengthen manufacturing and encourage exports-it does. I have noted the basic favorable tax benefits of the IC-DISC for an SME. There are additional benefits for estate planning and interest income deferral that I have omitted. I don’t claim to be a tax or accounting expert on this subject-one should seek advice from their accounting firm to create an IC-DISC and its ongoing management.
Competition comes in all shapes and sizes today; direct, indirect, and disruptive; however, there is another internal competitor in our midst – indecision. This sales trend is about the new stagnancy – procrastination culminating in no decision.
We are seeing global buying decisions taking a lot longer. Most global sales organizations try to implement key account sales programs which gets more people involved from both the buy and sell side. There are on average 5.4 buyers involved in a new supplier decision. Decision by committee add, on average, 20% more time to the decision making process. Frequently their decisions are postponed ad infinitum.
Buyer indecision making (my new Wikipedia word) has become more commonplace and acceptable. There lacks a sense of urgency to change.
Why is “indecision making” a growing trend in business?
Information overload. There is so much information available to buyers today-the oft quoted statistic is that they have 80% of the information required to make a decision prior to seeing a sales rep.
With information comes choice and without proper guidelines and filters in place to guide decision making, too much information and too many choices can lead to indecision. Data then needs to be compiled....and sometimes resurfaces in the corporate limbo.
The general causes of information overload include:
What are the by-products of information overload?
How as suppliers do we overcome decision inertia?
We need to know our product offering, business, markets, and customers inside and out to present viable solutions for effective decision making. If our clients are indecisive then we need to:
There is no one right solution anymore. There are options and each comes with the various benefits and risks. It’s how we help prospective customers decide what is best for their situation now and moving forward that will help them make a difference.
This is how true Business Development should work.