The IRS guidance that permits zero valuation of profits interests applies only to the initial transfer of the profits interest from the Bain fund partnership to the manager.
Under the zero-10 policy, which sees tax on corporate profits cut from zero for some firms and 10% for others, these companies would no longer make a direct contribution to Jersey.
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Competition between banks will tend to bring the lending and borrowing rates closer together, theoretically squeezing bank profits to zero in the ideal case of a perfectly competitive market.
Any market not dominated by a state-owned enterprise has too many players and overall industry net profits are near zero.
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Before the financial crisis the islands moved to allow most companies to pay zero taxes, while taxing banking profits at a 10% rate.
Companies like Google or General Electric should not be allowed to write-off losses to the extent that their federal taxes are next to zero, even as they are registering profits.
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And in large part these profits are the result of the government lending money at near zero interest which can then be reinvested at a higher return with little risk.
The resulting business, with its higher debts, would pay very little or zero corporation tax, because the interest on the debt was deductible from profits - and would therefore wipe out any taxable corporation tax.
Meanwhile, profits can be impressive if MSFT declines, but are limited to the stock falling to zero.
But for the economy as a whole, this can be a zero-sum game: depending on the industry, it may be solely a matter of redistributing profits, not improving overall productivity.
Fair market value of a profits interest in an investment fund is option value, which can be readily calculated, not zero.
While rates near zero give the firm the ability to borrow at next to nothing, it also has to lend with only tiny profits baked in.
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