Many companies, willingly or unwillingly, will have to deal with corrupt entities. The corrupt entity may be from the government or a private firm. To facilitate a deal, get favorable contracts, or secure the necessary permits, kickbacks will have to be given at some point. Though most jurisdictions outlaw the giving of kickbacks, this practice continues to be a way of life for many businesses. Obviously, the cost of the kickbacks is less than the benefit from the deal, or else, there is no point in handing them out. For these companies that give kickbacks, the money is treated as cost of doing business.
To deter this unsavory practice, tax agencies obviously don’t allow kickbacks to be expensed for tax purposes. The practice of giving kickbacks is also a criminal offense. However, for the financially creative, they’ll find ways to go around the restrictions.
A corruption scandal is currently making headlines. One party (OP) is alleging impropriety in a land deal that involved a high ranking official (HO). According to OP, this was how the kickbacks to HO were disbursed. Continue reading A Creative Way to Expense Kickbacks?