Conglomerate Tax – When Companies like Apple and Dangote Group Tax Citizens and Economies

Conglomerate Tax – When Companies like Apple and Dangote Group Tax Citizens and Economies

Conglomerates are unique. They operate at the upstream level and are very unique species in markets. They make critical infrastructure investments which help to unlock values and opportunities in economies. The reward is that they become centrally critical that everyone depends on them to operate.  As that happens, they impose tax – the Conglomerate Tax – on the economy as they have accumulated capabilities to redefine policies in their favors. Conglomerate Tax is global; you can read more about it here.

For all the talks of startups in Nigeria, the reality is that nations need conglomerates because their sizes help them to make critical investments. For example, Dangote Refinery can help fix some challenges in the transportation sector through efficient supply of fuel in the economy. When you have many of them, your economy does better. That means, you have companies with capacities to tackle serious market frictions. Yes, as conglomerates do so, they get huge rewards: they become tax collectors on the economy. And they do keep those taxes with lots of goodies from governments.

This is the reason why Dangote Group can get favorable forex on dollars while the trader in Aba does not register in government’s radar. Dangote Group is fixing real market frictions which government wants to see solved at the upstream level while the trader is “who cares’ because his trade is commoditized, operating at the downstream. 

That is at the heart of why some companies receive government benefits while others do not. Today, the U.S. government shared the goodies with Apple because it wants Apple to make Mac Pro in Texas. Yes, it waived many import duties from China, for Apple,  because Mac Pro has to be built in America. If you run a small startup in Texas, and asks for those waivers, the U.S. government will not bother because the problems you are solving in the economy are not in the upstream, as of now.

People, as you grumble over Dangote’s favourable treatment from the government, relax and get over it. Dangote’s problem is that he is the only one at his scale in Nigeria. By the time he is done with the refinery, the rules will be changed to favour him. People will forget how it was before him; yes, those fuel crises. Interestingly, if you do exactly what he is doing in other domains, government will do the same for you, provided you have scale and can solve real frictions government wants fixed. That is the nature of capitalism! Apple and America showed it today for Mac Pro.

Apple will continue to manufacture its Mac Pro computer in Austin, Texas, the company announced today, just days after the Trump administration granted the company tariff exemptions for Mac Pro components made in China.

The U.S. Trade Representative last week granted 10 of the 15 exemptions that Apple requested, Bloomberg reported. Apple CEO Tim Cook today credited the Trump administration for the company’s decision to keep assembling the Mac Pro in Texas.

 

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2 thoughts on “Conglomerate Tax – When Companies like Apple and Dangote Group Tax Citizens and Economies

  1. “People, as you grumble over Dangote’s favourable treatment from the government, relax and get over it.” This is where the misinterpretation and misinformation have their routes; people always point out how Dangote is treated differently, but they conveniently forget the size of capital it invests.

    All the self-made activists will never tell their uninformed and mostly poor compatriots how these things work, rather they prop them to hate conglomerates and wealthy people, as if small guys fix big market frictions.

    In the grand scheme of things, one Dangote is more useful to the government than a thousand traders in Onitsha, Aba or Lagos; so it’s easier to make deal with one giant, rather than holding meetings with thousands of people who will still end up being unable to finance the kind of projects the government cares about.

    To build railways, airports, refineries, power plants, you cannot be asking those whose annual turnover is still less than $20M to do so; you look for those who can quickly put together $5B, and they won’t dash you the money, you make deals!

    There are two types of injustices: treating equals as unequals and treating unequals as equals; only few people pay attention to the latter.

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