Is Tax Avoidance by Corporate and Multinationals Acceptable - Coursework Example

Surname: Presented to Institution Name, Location Date Is tax avoidance by corporate and multinationals acceptable? Introduction The ideology of business ethics and the responsibility as a social community are in most cases used interchangeably but each of the two has very different definition in a social context. The terminology business ethics consist of two words that are known to many, these are ethics and business (McWilliams & Siegel, 2001). Business is used to mean an organization or a company that has a main objective of providing goods and services to its customers for profit making, organization could be said to be social entities that are made in a deliberate structured and well coordinated systems of activities (McGee, Robert, 2006). The organizations are always linked to the external environment and they must always interact with the external environment in a responsible and ethical way in order to survive effectively. Ethics have been given definitions that are varied; these include the study of morality, the inquiry into the ideology of morality where the term morality refers to the judgment of moral standards and the rules of conduct in any business. The codes of the moral principles refers to the values that guides an individual or a business organization in regard to what is known to be either right or wrong(McWilliams & Siegel, 2000). This particular essay is going to give a detailed and precise information on the idea of business ethics and responsibility concerning whether the avoidance of payment of tax by the corporate organization and the multinationals is ethical or otherwise. It is also giving the importance of the business organizations to be responsible towards the external environment in the economic, legal and ethical manners (Crowe, 2008). Payment of tax by the corporate business organizations and the multinational cannot compromised its importance to the country cannot be underestimated although there are many point of views that have been raised concerning the ideology of tax payment. Some have advocated for the idea while other have always demonized the idea (McWilliams & Siegel, 2001). The points that have been put forth in the support of the proposition include the fact that it is the responsibility on an individual to God to oblige to payment of tax to the country in which an individual resides. However, responsible companies use the idea as their tool of responsibility socially whereby they go ahead and make their specific reference to abide by the law of the government concerning payment of tax, this is very ethical highly responsible of the companies(McGee, Robert ,2006). There are other companies who totally evade tax payment, these companies are viewed as irresponsible and unethical, this is due to the fact that the companies will have broken the rule of law which is the guiding principle on what is right and is ethically wrong. The law is designed to give a guidance not only concerning the ethics of the people but also how corporate should conduct business in the country (McWilliams & Siegel, 2001). The social responsibility of the company by giving back to the society is compromised and therefore the company is said to be very irresponsible and unethical. The company that operates in an irresponsible manner like avoidance of payment of tax creates a very bad image of itself and therefore its operations in the future may not be that secure due to the fact that the customers are always concerned with the operations of the company (Shumate & O'Conner, 2010). The payment of tax by the companies and the corporate citizens is known to be the most fundamental way in which they engage totally with the broader society. The taxes collected are very important in the development and the maintenance of the physical infrastructure and also to that sustenance of the same infrastructure (McWilliams & Siegel, 2001). It is very serious that the minimization of tax and the frequent tax avoidance by the companies is regarded as one of the important duties of the directors of the company that they are needed to perform on behave of the shareholders of the company. The curiosity comes to the idea that the corporate social Responsibility has dealt with all the areas of governance of the companies and yet it has never touched the area concerning tax payment (Crowe, 2008). This is happening despite the fact that the there have been a series of scandals concerning issue of avoidance of tax payment in some high profile companies such as Enron, WorldCom, Tyco, which are some of the big global accounting firms. The law firms have also drawn a great public attention in the growth of their tax avoidance mechanisms which include the transfer-pricing and re-invoicing among many other mechanisms that fits their court (Murphy, 2010). The fact that business organizations and corporate firms are open systems gives a meaning that even though these businesses have to make profit in order to continue its survival they have an obligation of making sure that they strike a balance between the desire to make great profit and also the desires of the society in which they do business which basically include payment of tax (McWilliams & Siegel, 2000). Many organizations in the world have developed the rules or in other words the standards of conduct that are both legal and implicit, these are meant to give guidance on how the business should fight in making profits and also responsible to the requirements of the society which include payment of tax(McGee, Robert ,2006). According to Cullen (2009) the idea of tax avoidance refers to the failure by companies to pay tax by letting the rules of tax payments to bend and avoidable. This is not illegal to some companies but the fact that the company is operating within the context of the law but not actually within the spirit of the law (Shumate & O'Conner, 2010). The businesses are required to pay the taxes as stipulated in the law of the nation in which the company operates. The issue payment of taxes is one of the critical issues concerning the ethics of any business; this is due to the fact that the businesses have a choice in the way in which they give an interpretation of the law that governs payment of taxes or failure to do so. In the recent times, it has been found out through surveys taken that many people are highly annoyed by the companies or organizations that fail to oblige to the payment of taxes (Thilmany, 2007). The society can decide to deal with the companies in a very destructive way for example avoiding use of the products and services that are offered by the company this way the company can easily run at a loss and therefore suffer the punishment of irresponsibility (McGee, Robert, 2006). Highly armed with critiques, companies which include Amazon, the Starbucks and Apple and a host of many other large multinational corporations have always been avoiding payment of the corporate taxations in some of the jurisdictions in which they do business (Murphy, 2010). The renowned G20 is setting a tighter noose on the course of the taxation of the business on the global level. The countries that comprise of the G20 had initially asked OECD to come up with a plan in which they would combat the menace. The action plan included the prevention of the gaps that resulted in lack of taxation of the income; this was seen to be shoring up the transfer of pricing regimes connecting the income with the economic activities, leading to the excessive leverage and a better transparency (Crowe, 2008). Nobody can easily say that cheating when it comes to tax is acceptable, tax avoidance by individuals and businesses are not entirely highly harmful but socially ill. Deliberate and unexpected avoidance of tax always arises from the economic activities that are not highly taxed, an example is a situation where the government makes a decision to tax heavily the banks compared to the manufacturing companies, and the owners will avoid the heavy tax by investing in the manufacturing sector. Although it is not ethical to avoid tax payment investing in the economic sector that the jurisdiction doesn’t levy high taxes is legal and ethical since it doesn’t break any law (Murphy, 2010). It was very immoral for Apple which is one of the wealthiest companies in the United States to avoid paying taxes. It was found that Apple had not paid about seventy four United States billion dollars to the US government over the past four years. The practices of apple resembling those of Amazon, Google, GE and many others are not regarded as victimless (Branco & Rodrigues, 2007). The action directly affects the inability of the nation to close the budget deficit and therefore help the development of the painful sequester cuts that have prevented the government from funding it operations fully. The unethical and irresponsible act land problems to other companies and the common citizen as the government has to collect more taxes from them while the wealthiest companies in the country fails to pay their part of the revenues(Crowe ,2008). Although the avoidance by apple to pay taxes was not illegal but it was very irresponsible and unethical of them, why wait to see other companies suffer paying a lot of taxes while they sit back and wait for the citizens who are its customers to pay the taxes? (Siegel, 2009). It is clear that just because a thing is entirely not illegal doesn’t mean that it is moral and acceptable socially, for example, it is legal for companies to emit any amount of the toxic chemicals into the air but not totally ethical and socially acceptable. The point is that the boundaries that that the law allows are very large and it entirely encompasses no shortage of the things that are unsavory and highly objectionable activities (Murphy, 2010). Some people will refer this to as a breach of the fiduciary responsibility while others will term it as ignorant for apple to find all means minimizing its taxes just because it was no illegal(Siegel, 2009). It is highly responsible for any person to be disappointed by the unethical things that tax evaders do, since they are dubious, and albeit legal activities against the society. We should not only blame the companies that fail to pay tax since they are not the only players in propagating this particular ill dead, blame also lies on the law makers as they are ones who fail to nail the tax evaders(Branco & Rodrigues, 2007). Closing the loopholes that the tax evaders find has become hard since there is extensive lobbying activities and the campaign contributions that are made by the same companies that avoid the payment of taxes, this helps in maintaining the status quo and reducing the expenditures of the company which is totally irresponsible and unethical due to the fact that it affects the community development (Crowe, 2008). Although there has been an appearance of disagreement about the basic need for the organizations to show responsible actions towards the society and the natural environment in which the businesses operate. Many organizations by themselves have adopted a wider range of responsibility when it comes to the idea of corporate social responsibility (Murphy, 2010). The point of stand concerning the idea of corporate social responsibility like payment of taxes differs very much from that of the social responsibility in the free market economy. The difference ranges from high and low degrees of the socially responsible corporate activities and practices. Some of the organizations who breach the so called good conduct in the social responsible manners act minimally in solving the problems that are faced by the community and the environment they operate (Crowe, 2008). For example corporations that evade taxes do not help in alleviating the poverty and infrastructural problems that are faced by the community. The organization that take a stand against the society and does well when it is free from the regulations that are rendered by the government discarding the social responsibility and favoring selfish gains at the expense of the community do not perform when at the end since the society always have its ways of checking the balances(Shumate & O'Conner, 2010). The opposite of social obstruction is social obligation; social obligation is the situation where a company does everything that is required to be done by the community and also legally and does nothing more (Crowe, 2008). A company that adopt the positive social response does meets the legal, ethical and social requirements by the society which may include the payment of taxes, the organizations can also go ahead to achieve more than the required selected cases and does more(Ganguly, 1999). Contributing not only through the legal procedures to the development of the community but doing other things such funding disaster managing organizations like fire fighting groups. This is called social contribution approach, where a firm or a company views itself as a citizen of the society and in a very proactive way the firm seeks opportunities that it can contribute in (McGee, Robert, 2006). Conclusion The behavior that people portray while doing business have always had a greater impact in the entire world. The significance of the impact that it has on the world cannot be underestimated, for example the payment of tax as of the social responsibility of the multinationals and corporations helps in the development of the infrastructure on the environment in which they are operating. This brings a positive impact on the society and creates a good business environment for the company to work. On the other hand, some organization can decide to go against the societal expectation by minimizing or evading of tax payment which is a very bad show, both ethically and socially. When a business entity fails to oblige to payment of taxes it goes against the good social conduct and ethics. Organizations and the corporate firms should therefore embrace the idea of tax payment as an integral part of the social obligation to the community in and the government of the country in which the business operates. Paying of taxes enables the government to develop the country hence enabling the firm to conduct business in a conducive environment and make good money. By paying of taxes the company too has a way of maintaining a good relationship with the public. References Branco, M., & Rodrigues, L. (2007). "Positioning stakeholder theory within the debate on corporate social responsibility". Electronic Journal of Business Ethics and Organization Studies 12 , 5– 15. Business Ethics Briefing. 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