The International Monetary Fund (IMF) has forecasted a positive global growth outlook for the year 2018 to 3.9 percent, marginally better than the upward swing witnessed in 2017 of 3.7%. This is mainly in consonance with the expected recovery of the world economy after the recession witnessed during the latter part of the last decade and its continuation thereafter.
The positive growth forecast has been fueled by the recent U.S tax rate cuts from 35% to 21% and a marginally better performance posted by some of the important world economies like China, Europe, India, Russia, Japan and others. However, does this mean good news for your IT business?
Are there any hiccups along the way?
Notwithstanding the positive sentiments expressed by the IMF and other agencies like the World Bank, some imponderables have the potential to halt the growth momentum at best or turn the cycle back at worst. These relate to the rise in crude prices, the ongoing crisis in the Middle East and the firming up of inflation. The latter can act as a dampener for businesses like that of yours as input costs and tax rates would increase.
How higher input costs impact your IT business?
Due to a possible firming up of inflation in major economies as a result of an increase in crude oil prices, governments will be forced to undertake unpopular measures to shore up revenues like increasing taxes and borrowing costs. These will have adverse fallout on your input costs related to the buying or leasing of computers, software, office space, hiring manpower and logistics, among others.
Is expanding into other markets or territories a way out?
Diversifying your portfolio and expanding your business to other markets are always good news but at the same time are fraught with risks as well. The risks could be in the form of increased competition, a backlash from the existing players, fluid market conditions, tough regulations, and an unfavourable business environment. Moreover, given the more protectionist policies adopted by countries like the US, Australia and members of the European Union, to move into these territories would be expensive and risky.
The impact of higher taxes
If your IT business is in any of the above countries or you want to expand to these countries, then you have to take into account the existence of high corporate and individual taxes there. In fact, the recent tax cuts in the US notwithstanding, the cost of setting up a business in the country can be huge. The higher taxes can take the zing out of your profits and make your products costly than that of your competitors. Thus, reaching out to new but choosy customers in these territories can be bad news.
The beacon of hope
When countries like the US, European Union, Australia and many others have a higher rate of taxes, going there could be a costly proposition. The best way in such a situation is to either set up an offshore account in a tax haven like Georgia or set up a company there to leverage its lower or no tax rates (especially in a virtual zone,) and connect with customers in the markets mentioned above.
Staying ahead of competition means leveraging the advantages offered by the global business environment. However, to make this a reality it is better to take the help of reputed consultants who can facilitate IT company set up in Georgia.