What Taminad is describing has been a common practice in today's corporate world for a long time.
Imagine a small business in Canada that has become successful. It is now earning $500,000 a year in profits. The owner does not like paying taxes on those profits.
So the owner sets up an offshore company (which he owns) in Bermuda. The offshore company then charges the Canadian business $500,000 as a "management fee." And the business pays that fee. This "expense" reduces the Canadian tax paid to next to zero. Bermuda taxes the offshore company on its profit, but the taxation rate is very small. Almost next to zero.
The business owner pays very little tax. What little tax is paid goes to Bermuda. Bermuda provided no infrastructure for that business to do business. Everyone wins! Right?
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The spolu is in its third draft and requires more work. But with what is currently there, I can already address Taminad's concern:
1. The "senior management team" (analogous to the board of directors) will be structured differently. The investors will be a minority, my book recommends three out of eight. Employees will have two members, and employees will elect those members. In other words, it will be hard to set a corrupt mechanism to where the investors can mask as employees who did little real work for the spolu.
2. The incentive to cheat the spolu is not there. In this case, the $500,000 will be split between the six stakeholders, with employees getting one-sixth, which is about $83,000. The "investor/employees" would have to share that $83,000 with the other employees, so this profit would be further diluted. A lot of work to set up this corrupt arrangement for such little reward!
3. Businesses in the spolu network would be subject to periodic audits. These audits will be investigating things like "management fees" to see if they are valid. If there is activity that too suspicious and the spolu is not becoming more transparent, the business is kicked out of the spolu network.
4. The spolu network will have whistleblower mechanism in place. Employees who believe suspicious activities are happening can report them to the auditors anonymously. For example, a bookeeper can report "Check #1189 on July 9 is a management fee where nothing was done." Then the auditors know exactly where to look.
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Thanks for the great question. Maybe I need to set up an FAQ section for the spolu.
