Development of Arguments

Question: Critically evaluate the development of arguments supported by relevant credible sources and appropriate ref. style. Answer: Background and ethical questions: The multinationals has been going a far way to protect their tax revenue and thus avoiding the tax payments and this has become a major concerned relating to ethical issues. These corporate are either paying fewer tax or virtually no tax at all. The way these business have been interpreting the laws of tax and paying the taxes in falling under the purview of the regulations of tax system , but they are able to generate the opportunities which does not allow them to pay the appropriate amount of tax. One of the unethical practice by the multinationals has been the avoidance of tax and it is treated to be immoral and it undermines the tax system integrity. The transactions of the companies are structured artificially so that the relationship between legal form and economic substance of the transaction is minimized. One of the reason that the income is not taxed is because of the exploitation of the difference in tax laws of different countries. Avoiding the payment of corporate tax is one of the aspect of Corporate social responsibility and is considered as one of the social obligation towards the society and avoiding the tax payments has to be regarded as being socially irresponsible. Since avoiding tax is a legal activity and the company is abiding by the tax laws, it becomes ambiguous as to what does the tax payment stands for and the rules prescribed under laws. The tax planning is merely done by the company so as to avoid the taxes payment and in the cases depicted here, they are virtually not paying any tax which leads to tax evasion and becomes illegal. The practice of tax avoidance by the corporate is not compatible with the code of conduct as they are actively engaged in avoiding the payment of corporate tax . the corporate intends to pay the taxes not by thinking or following the spirit of the law rather they follow letter of law and this enable them in creating the opportunities for virtually paying no tax. So the corporate is posed with the question that is ethical in nature that whether they are being socially responsible when carrying out their liability while paying tax. Analysis of stakeholders : Stakeholders are a valuable resource and their contribution would help in making the companies profitable and competitive. The frameworks of governance should be in align with the interest of stakeholders. The impact of commitments are addressed as per the OECD guidelines for multinationals. The stakeholders needs to have access to the necessary information and their participation is required so that they are fulfilling their responsibilities. Any unethical practice by the entity would violate the rights of stakeholders. The disclosure on the material matters regarding the performance, ownership and governance of the companies should be accurate and made on time. The framework of corporate governance should be effective and the insolvency framework should be efficient and the creditors rights should be effectively enforced. Corporate governance discussions based on ASX 2010 principle : The corporate giant such as Google, apple and Microsoft operates globally. These entities are listed on ASX and the corporate governance practices are recommended by ASX itself. However these recommendations made by ASX is not mandatory as depending on wide range of factors, the entities can adopt different governance practices. These listed entities incorporates outside Australia and are subject to Corporation Act and they are entitled to comply with the governance practices that are conformed by the entities that incorporates in Australia under the corporation Act. The recommendation are modified considering the fact the entities which are listed but does not incorporate in Australia and they are as follows : As per recommendation 4.2 , a declaration from the CEO of the entity that the financial recordings have been maintained properly and is in compliance with the appropriate accounting standard so that they depict a fair and true view of the performance and financial position of the entity should be received before the boards approves the According to recommendation 4.3, the listed entity needs to ensure the availability of auditor in annual general meeting so that all the questions relevant to the audit from the security holders is answered . There is a principle [ X ] which is applicable to the listed entities which is managed externally and it comes with a separate section which explains in a more explanatory manner which recommendations should be applied to such entities and which does not. The council wishes to strike a balance between interest and needs of stakeholders. The move by the council to provide the entities with the flexibility to disclose their corporate governance on their respective websites rather than in their annual report. The council seeks to know whether the stakeholder support this flexibility idea. Respective responsibilities of boards and management should be disclosed and the way of monitoring and evaluating such performance also needs to be disclosed. The entity should make appropriate check before filling any vacancy or appointing any person as an additional director. The listed entity needs to have a reporting line directly with the chair of the board. The board of the listed entity should be of appropriate size, composition , skills so that they are able to discharge their duties effectively. The entity should be actively engaged in promoting responsible and ethical decision making which would help in creating long term value for the stakeholders. There should be appropriate disclosure of code of conduct . Also , the organization of economic cooperation and development set some rules for the corporate operating in several countries so that they were not required to pay tax more than once but the entity structures the tax planning in a way that it leads to tax evasion. CSR and corporate social performance : The corporate giant such as Apple, has been investigated by the Australian government on their way of avoiding the taxes. The entity shifts and change the profits to minimize the corporate taxes paid by them. The amount of tax paid by the company is just 0.7 % of the turnover which is much lower when we take their sales figure into consideration. The company shifts the profits of shore so as to minimize the tax paid. Such entities escape tax by exploiting tax laws. The government facilitates the company to help them avoid foreign tax and by doing this it would make the entity competitive in the world market. So the tax liability is shifted to such countries which is low taxed. Though , the business they are doing is under the arrangement of corporate governance and the international tax laws but they have a policy of transfer pricing and they arrange themselves in such a way that the royalties of these multinationals are routed through such countries which does not tax them, in this way they are not only avoiding the tax payment but evading tax which is illegal. The entity which is more socially responsible they have a low likelihood of avoiding the tax. The impact of tax avoidance has become a social agenda worldwide. Corporate social responsibility should not be a cost on way of maximizing the shareholders wealth and it is regarded as the legitimate business activity. The corporate performance in terms of being socially responsible is related with the tax avoidance and it is not perceived by the stakeholders as a good sign on the path to development. A company carrying out its CSR activities in a irresponsible way are found to be engaged in the activities of sheltering the tax and they become quite aggressive in avoiding it. Avoiding tax by following some strategic tax behavior would leave the government with inadequate resources to carry out its various function. Ethical Analysis : Tech giant Apple has been challenged ethically when it comes to the payment of tax. Avoiding tax is an ethical issue which is concerning the government . tax avoidance is treated as one of the form of avoiding social obligations. The vulnerability of the company towards the accusations of selfishness and greediness increases and thus it destroys the trusts of public and damage the reputations. The companies which are socially responsible has been paying a fair amount. Avoiding the tax payment is considered as immoral and unethical practice and the integrity of tax system is undermined. The guiding ethical transparency, consistency and accountability principles should be underpinned by tax policies. The arrangements of tax planning by the corporate such as Apple, involves intentional approaches to exploit the tax laws and goes beyond the policy content of laws are not considered as ethical. So the business needs to be transparent when it comes to planning their tax structure. Which wo uld make the business certain and it would also help in gaining the trust of public. Avoiding the tax legally by Apple is considered as unethical with the current system and has put a question on their ethics of actions. Apple has three subsidiaries based in Ireland which does not have any tax jurisdiction at all. Apple has reported a sales income of $ 84 billion in every four year but it had hardly paid any taxes or if paid then at the lowest rate of 0.05 %. Such strategies of tax minimization has made these tech giants to spared themselves of paying corporate tax on profits. The income earned outside the home country was shield . the fair amount of tax which the corporate woes to the government amounts to defrauding the government and breaking the law. Literature support and argument : A technology company Apple has been investigated by the Australian government and conclusion is made whether the tax system by such corporate is compatible with its ethical, social, moral and is socially responsible. The tactics followed by such multinationals in avoiding the payment of corporate tax is drawing attention of the government and they are charged with having an unethical methods of avoiding the payment of fair share of taxes. Some of the literature support that is criticism of Apple toward their tax behavior which have been put forwarded are : The revenue of ten billion dollars which Apple has earned offshore has evaded tax or has not paid any amount of tax by using complex web of the countries outside its Apple has set up subsidiaries in Ireland where there was no office or any bank accounts or financial matters , the only intention of setting up these subsidiaries was to protect themselves from paying fair value of The company pays tax amount to only 0.7% of its turnover. The different country has a different way assessing tax and whether the entity should pay tax or not, so Apple has avoided paying tax in that country on the revenue it has earned by operating internationally. This has depicted the company as being immoral and socially irresponsible and this is because the government has not be able to draw the tax revenue which could be used for the benefits of public. The corporate also follow transfer pricing policy where exist loopholes as they artificially structure so as to avoid paying The royalties of Apple go through the countries such as Bermuda and Ireland where they are not taxed at all and it is n done deliberately to avoid corporate According to organization for economic cooperation and development , the strategies adopted by the tech giants to avoid taxes has threaten the stability of system of international tax and has eroded the tax base of countries. By doing this, they prove them of not being socially responsible and do not intend to solve the fiscal problems of their nation. It is very clear that it is unethical on the parts of the corporate to avoid paying fair amount of corporate tax. The argument put forward in support of avoiding taxes by the these tech giants : the government is liable for charging high tax on profits which act as an encouraging factor for the multinationals such as Apple to make the investment In order to be competitive in the world market, the tech giant Apple has convinced the government of its home country to avoid paying foreign tax which is sought as legal under the current tax The subsidiaries of Apple operating in countries such as Bermuda and Ireland plays an important role in international business activities and that the charge of setting up the business to avoid tax is not The tax systems of that countries are to be blamed. Another things which also needs to be thrown light upon is seeing these tech giants from different These corporate avoid paying tax or they minimize the amount of tax paid to the government so that they are able to maximize the profits that they owe to shareholders. If they do not strategies themselves or follow nay tactics then would be considered as irresponsible financially by the stock market and shareholders. their nation. It is very clear that it is unethical on the parts of the corporate to avoid paying fair amount of corporate tax. Apple would also consider unethical on the part their shareholders if they do not maximize the profit and ff they avoid the tax in a legal way , it is considered to be unethical on their part as they do not intend to perform their social obligations. Recommendations : The schemes adopted by the corporate is considered legal under the current system of international taxation and arrangements of corporate There also exist loopholes in the tax legislation system, of which the company is taking advantage .the government should rework on tax system to capture the fair amount of corporate tax which tech giants owes. So, the avoidance of tax is mainly due to the inefficiency on part of government. Shortfall in the tax revenue is a direct consequence of tax avoidance The tax codes for the local and international business needs to be restructured which calls for a level of cooperation among different And also as per OECD , the problem if tax avoidance exists because the actual place of carrying out business and where the profits are reported is different, so there is no transparency also. This is unfair on part of the corporate. So, the government should try to capture their fair share of tax and also the corporate needs to be honest in paying their share of tax where they carry out the investment activities. Any entity found guilty of refraining the corporate tax, they would be required to pay the tax amount double than what actually it has to pay along with the The contract with the foreign related party with the listed entity has to be entered in a formal way and there should be formal agreement of the same. 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