Research Methods & Methodologies in Accounting and Management - Essay Example

Accounting Business Ethics: Ethics and Corporate Social Responsibility and How ethically justifiable is tax evasion: A research into legitimacy and the legality of tax avoidance. Summary Businesses derive their legitimacy from the community they operate in. One of the ways of legitimizing a business is by paying the tax obligation as and when due. Of late, some businesses have managed to come up with some lucrative tax planning strategies that significantly minimize their tax obligations through exploring the tax avoidance provisions.

Multinational companies are the main culprits of this ‘excessive’ tax avoidance. While they may be still operating within the legal framework, it is tricky to determine whether they it is ethical to do so. This study tries to establish the justification of tax avoidance and ways in which a tax avoidance window can be offered yet still be secure from misuse by unscrupulous business persons. Research Question How do the differences in international taxation interact with practical domestic concerns of tax policy and Regulation?

Background/ Literature Review Taxation provides a unique opportunity for businesses to show their corporate social responsibility policies because it its compliance or avoidance indicates the extent of social accountability the business has to the community (Foster, 2013). In the recent past, however, there have arisen many cases of companies, especially multinational corporations, failing to pay their due share of corporate tax. No business wants to pay more taxes that they should; the managers are always striving to minimize their tax liability by utilizing all the necessary venues as provided by the tax legislation.

This is known as tax avoidance, and is legal (Prem and Hampton, 2005). It is very different from tax evasion, which simply refers to willful practice of not fully disclosing the taxable profit and in effect, reducing the tax liability payable to the authority. Tax evasion is always, or almost always, illegal and unethical (Fagbemi, Uadiale and Noah, 2010). But tax avoidance is perfectly legal; the only question is whether it is ethical or not. Multinational corporations are the most susceptible to tax avoidance; the following are some cases.

In the year ending September 30th 2012, the Starbucks UK unit recorded a loss in its operations consequently failing to pay the corporate income tax for the third year in a row despite making sales of over 3 billion UK pounds (Bergin, 2012). According to Her Majesty Revenue and Customs authority, Starbucks had failed to declare any profits during its entire period in operation in the UK managing to pay only 8.6 million UK pounds in 14 years (Bergin, 2013). Apple Inc., another giant business, made over US $74 billion between 2008 and 2012 through its Ireland subsidiary Apple Sales International but managed to pay only US $ 10 million as corporate tax.

Amazon, Facebook and Google are the other multinational companies that have found themselves under scrutiny for ‘excessive’ tax avoidance which some have labeled as unethical (Bentley, 2013). Most of these companies are faulted for being shrewd and employing tax advisors who manage to take tax liability to the minimum by exploring the ‘loopholes’ in the legal provisions. Prem and Hampton (2005) noted these practices may include charging overseas subsidiaries royalty fees, setting up subsidiaries in tax havens, transfer pricing and fully financing subsidiaries through debt so that they pay the parent company interest which is tax-free thereby reducing their tax liability.

The question is whether these multinational companies are ethically correct to explore these legal means and in the process avoid paying taxes at all. Should they embrace accountability, transparency and consistency at the expense of profit making? Is avoiding paying the right share of tax neglecting their social responsibility to the community? This study seeks to establish the same. Aims i) To investigate the perception of taxpayers to the payment of taxes on ethical reasons. ii) To identify some of the tools used by Multinational companies to avoid paying taxes and how effective they are. iii) To determine to what extent tax avoidance is ethically justifiable and how can the tools of tax avoidance be reduced through relevant legislation without injuring businesses.

Methods The research design to be employed will be surveying. This is because it can be used to comprehensively analyze the question raised. It is efficient in collecting information where there are a large number of respondents and statistical analysis of quantitative information is required. The population is the business taxpayers and will comprise of all the stakeholders in taxation, including the taxpayers and the tax policy formulators. Purposive sampling which is non-probabilistic will be employed to get as much information on the subject as possible from information-rich sources.

Lastly, descriptive analysis will be used to analyze data in form of percentages and standard deviation and content analysis (Smith, 2011). References Bentley, C., 2013. Apple’s tax ethics: Unpatriotic or shrewdness in action? The Washington Post. [Online] Available at: < http://www.washingtonpost.com/blogs/on-faith/wp/2013/05/23/apples-tax-ethics-unpatriotic-or-shrewdness-in-action/> [Accessed 29th November 2013] Bergin, T., 2012. Special Report: How Starbucks avoids UK taxes. Reuters [online] Available at: < http://www.reuters.com/article/2012/10/15/us-britain-starbucks-tax-idUSBRE89E0EX20121015> [Accessed 29th November 2013] Bergin, T., 2013. Starbucks reports UK loss pays no tax for 2012.

Reuters [online] Available at: < http://www.reuters.com/article/2013/06/28/us-starbucks-tax-britain-idUSBRE95R0YE20130628> [Accessed 29th November 2013] Fagbemi, T., Uadiale, O., and Noah, A., 2010. The ethics of tax evasion: Perceptual evidence from Nigeria. European Journal of Social Sciences, 17(3), pp. 360-371. Foster, P., 2013. Avoiding tax may be legal but can it ever be ethical? The Guardian [online] Available at: < http://www.theguardian.com/sustainable-business/avoiding-tax-legal-but-ever-ethical> [Accessed 29th November 2013] Prem, S.

, and Hampton, M., 2005. The role of accountancy firms in tax avoidance: Some evidence and issues. Colchester: Elsevier. Smith, M., 2011. Research Methods in Accounting. London: SAGE.