Fundamental Moral Issues - Assignment Example

TAX AVOIDANCE Question One: What is the major ethical issue that needs to get addressed and the underlying fundamental moral issue associated with that ethical issue? Companies seek to reduce their tax liability as part of the good governance by “tax planning” (Kristina & Attiya 2). Hence, they use the mechanisms and tools that the government makes available for the firms specifically for this objective: deductions, allowances, exemptions, rebates, etc. Firms make choices on how to pursue their business aims in the light of every implication including tax consequences. In this case, the main ethical issue is the firms, Apple, using offshore bank accounts in order to avoid taxes and lacking consideration for the benefits of US economy. Apple Inc. is an American multinational corporation that produces consumer electronics as mobile phones, computers, and online services. Despite their predominant success, there have critics on their tax payments systems. Tax planning get seen as a complaint behavior, but tax avoidance is more of the unethical issue. Tax avoidance refers to the legitimate but also aggressive use of things like financial arrangements along with other arrangements to have a tax result that is not anticipated or intended by the government. The usage of offshore bank accounts or overseas tax havens is the major example. Avoiding tax through “bending” the tax system rules is not illegal though it seems to be operating within the letter by many rather than the law spirit. Nations set out laws on how taxes should be paid or apply; businesses are then expected to pay their tax due according to the law. Hence, this issue falls into ethics realm due to business have a choice of how to approach and interpret the law; hence, paying the taxes. Following that it remains legal in what business does in drawing its ethical line on interpreting the tax law, the subject remains to a good discretion deal. The issue is several fundamental moral issues that associate with tax avoidance. The main moral issue is that tax is a social responsibility. Paying a fair tax amount in the countries the companies operate a responsible thing that a firm should do for the social good. It is because the taxes are meant to provide the public with public services funds for education, health care and another public investment in infrastructure in both developing and developed countries. When governments spending cuts have a real effect on everyday people’s lives, some argue that it is morally indefensible for the multinational corporations to avoid paying their fair US tax shares. It is argued that avoiding tax is avoiding social responsibility. Such behaviors may leave a corporation vulnerable to accusations of selfishness and greed, destroying public’s trust and damaging their reputation. In contrast, company directors argue that it is their responsibility to increase the value they deliver to the shareholders; thus, including keeping minimum tax costs within the legal realms. Hence, it is a great dilemma on whether Apple should focus on maximizing its value, as it is their responsibility towards shareholders or pay taxes as a social responsibility. Question Two: What would you do in this situation if you were to expose the moral philosophy assigned to your team? In this situation, I will emphasize on the fact that, even though, the phantom taxes are not illegal they are not ethically or morally right. If I am to expose the tax avoidance situation, then I will argue with social responsibility fact towards payment of taxes. Now that most businesses and individuals in U.S pay taxes that is due and avoid bending or breaking the rules in avoiding it, it is important also Apple to stop avoiding the taxes and pay the due tax. It is essential to emphasize the social responsibility significance that tax plays in the country. Furthermore, payment of taxes benefits the companies directly (Kristina & Attiya 8). For instance, the income is used for ensuring good health and security for the workers; thus, resulting to a well regulated business due to healthy workers. Hence, in the process of exposing this situation, there are different things that I will be doing expose the unethical behaviors of various corporations. First, I will create more awareness for raising funds for the government that will help in detecting the practices early and effectively counteracting with them legally. The action will help stop the corporations early enough before holding back the money and making the government lose revenues that will help in other social issues. Secondly, I will give individuals and firms the opportunity of declaring what they owe. The process will incur having several campaigns that will encourage companies and individuals to tell the government what they owe before I expose them. The process will even expose those that I am not aware who are still practicing the unethical practice. The campaigns will also emphasize the responsibility that companies have in the country through their taxes. Thirdly, we can also draw up a global corporation template to report to the tax authorities on where to make profits and pay taxes worldwide. The strategy will give tax authorities worldwide a tool that is against tax avoidance by the multinational corporations. Additionally, we can recruit more people to speed up the work of revenue, customs and treasury authority’s work of identifying risks that relate to large businesses. Hence, this will help to ensure that multinationals corporations like Apple fully declare their US profits and pay taxes due in US. Additionally, following the recruits, it will help in preventing and exposing the inheritance tax avoidance, using offshore bank accounts, trusts, and other entities. The recruits or specialists will emphasize on the tax and agents intermediaries involved in the activities. The corporations can also be exposed through establishing automatic information exchange between tax authorities. Lastly, I will have the tax administration invest more on new technology and data to identify frauds and avoidance behaviors. The tax data connect analytical computers systems will have to be improved so that they can identify compliance risk areas and allowing the administration to act swiftly and investigate the issue. Question Three: What are the facts of the situation that are relevant to the ethical dilemma, which should be taken into account? This situation presents several facts that should be in consideration. One of the facts is that Apple is well aware that the phantom taxes are ways of bypassing the US tax systems. Thus, using this method, they can save billions of dollars every year. Reports say that Apple’s offshore tax structure has held several billion dollars in profits in subsidiaries in Irish (Kristina & Attiya, 6). The key subsidiary that is a holding company including every Apple’s retail stores in Europe has not paid for any corporate taxes in the past five years. The other fact is that the strategy designed to avoid paying the US taxes is legal. In this case, the companies try to minimize their tax liabilities and increase their value. According to the law, the companies have the right to make a choice on how to achieve their business goals in light of any consequences. As a result, the strategy helps the company to create more value for the company and satisfy their stakeholders by adding their value. Tax avoidance has the fact of avoiding social responsibility towards the country that the company is operating. The firm is obliged to pay tax to help the country in managing its social services to people. It is evident that taxes have a great impact on the individual’s everyday life since the government can maintain people’s health, security, education and another public investment. Hence, since everyone gets obligated in paying taxes for the services, the company is failing its social obligations by avoiding the taxes through offshore bank accounting. The company is also changing people attitudes due to the behavior. The issue can also influence other innocent taxpayers to stop paying and create other offshore bank accounts. People accuse the company of selfishness and greed. Thus, it results to tarnishing its reputation along with destroying the trust that people have in the company. As the company is gaining a lot of profit due to the adopted strategy, the government is losing a lot of money on the other hand. The government is well aware that the laws are inadequate and other private companies and individual business exploit the weakness to avoid taxation. If the government had measures to curb companies that have offshore bank accounts they could have been aware of the company’s wealth and cut fair taxes. Thus, the government could have benefited the billion dollars that Apple has held back in their offshore accounts. Lastly, the law does not promote fairness. The public expect business or companies to pay tax fair shares that may not be similar as what the law allows or requires. The ACCA argues that it is hard to define “fair taxation” in a way, which will satisfy every interested party. It is essential that the tax policies to be underpinned by the guiding ethical principles of transparency, accountability, and consistency. Hence, the tax contributions should demonstrably fair return towards the society. Question Four: What are the major alternatives for addressing the major ethical issues? Apple should find strategies that will change their reputation and consider the benefit of US economy. The company can decide to restructure its international accounting processes in a way that will serve as an alternative to reporting its total income accurately. Hence, this will consequently reestablish the firm’s trustworthiness and integrity on American soil. The restructuring of the accounting processes will have the Apple declare its wealth and have the government monitor its wealth. Additionally, the company can also decide to announce its wealth to the government so that to restore the public’s trust. The strategy will have the government and the public be aware of what they own and get rid of the doubts on what they company own. The company should then pay the tax that it owes the government. Hence, this will clear up all the unethical critics that Apple faces. In conclusion, the main strategy is aiming at restoring Apple’s reputation, and making people trust them again (Kristina & Attiya, 9). Thus, the company in order to act ethically it should announce its wealth, restructure their international accounting process, and pay all what it owes the government. Conclusion Tax avoidance refers to the legitimate but also aggressive use of things like financial arrangements along with other arrangements to have a tax result that is not anticipated or intended by the government. Apple uses the strategy by using offshore bank accounts in avoiding taxes. The main ethical issues that arise in this situation is ignoring the social responsibilities. As I result, given the responsibility to expose the issue I will give the company opportunity to declare their wealth and create awareness that will emphasize on the social responsibility towards paying the taxes. The facts about this issue are that Apple saves a lot of money, and the government loses a lot of revenue for social service. The company also loses its reputation and trust from the people. As a result, the alternative to the situation is by having Apple restructuring its international accounting systems and declare its wealth along with paying what the company owes the company. WORK CITED Kristina Froberg & Attiya Waris. “Introduction”. Bringing the billions back: How can Africa and Europe can end illicit capital flight. Stockholm: Forum SydForlag. 2011. Read More