Essays on Ethics in the Tax Affairs of Multinational Corporations Coursework

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The paper 'Ethics in the Tax Affairs of Multinational Corporations" is a good example of finance and accounting coursework.   Companies are required to pay tax. This essay looks at the place of ethics in regard to the paying of tax by MNCs. The essay is developed from the argument that companies have to pay tax as part of their social contract with the societies where they operate. At the same time, it is argued that MNCs are not obligated to pay the highest tax rate, and thus, they can apply mechanisms such as transfer pricing to reduce tax liability.

This is illustrated using the case of Google. The essay suggests that although the place of ethics in the tax affairs of MNCs is not very clear, a place can be seen in terms of the position that one takes when looking at how and whether MNCs pay tax. Introduction “ Companies have a responsibility to pay corporation tax in the jurisdictions where they operate” [Angel Gurria – quoted by Wetherly and Otter (2014, p. 27)]. The importance of paying taxes is that governments use tax revenues to build schools, ensure that there is a public education system, support health services and provide other amenities to the public (Christianaid. org. uk 2015, p.

1). In other words, tax revenue is the essence of the social contract (Christensen & Murphy 2004, p. 37). However, opinions are varied on whether it is good to avoid paying tax (Shaw 2017, p. 196). In literature, there have been numerous cases of multinational corporations (MNCs) such as Google, Starbucks and Amazon avoiding to pay tax (Christianaid. org. uk 2015, p. 3; Kavoussi 2012; Rawlinson 2016).

Undeniably, there are good reasons why MNCs need to pay tax in the jurisdictions in which they operate. Equally, MNCs have reasons why they need to avoid paying some of the taxes that they are required to pay. This essay will delve into the discussion on MNCs’ tax obligations and tax avoidance and analyse whether or not there is a place for ethics in the tax affairs of MNCs. MNCs’ tax obligations and tax avoidance One of the most common arguments that have been put forward about companies is that corporations have to pay their fair share of taxes (Christianaid. org. uk 2015; de George 2001, p.

52). The key point in such arguments has been that when companies pay taxes, they help in improving the quality of life of millions of people through the services that governments provide to the public using proceeds of taxation (Otusanya 2016, p. 31). Therefore, it is expected that companies will pay their taxes as part of their responsibility to society. Taxation of MNCs is a complicated issue because such companies operate in many countries (Srivastava 2008, p. 234).

Tax affairs of MNCs are affected by issues such as host country and home country taxes as well as other factors (Srivastava 2008, p. 234). For instance, if a company has different departments or units located in different countries, it has to pay tax in each of the countries in which it operates. For large corporations with operations in very many countries, paying tax in each of the countries of operation can be a heavy burden. It is possibly because of this reason that large MNCs try to avoid paying some taxes in the countries in which they operate, an example of such corporations being Google as noted above.

References

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Back, PF 2013, ‘Avoiding tax may be legal, but can it ever be ethical?’, The Guardian, 23 April, viewed 7 January 2016, .

Christensen, J & Murphy, R 2004, ‘The social irresponsibility of corporate tax avoidance: taking CSR to the bottom line’, Development, vol. 47, no. 3, 37–44.

Christianaid.org.uk 2015, The tax dodging bill and why it is needed, viewed 6 January 2016, .

de George, RT, 2001, ‘Ethical dilemmas for multinational enterprise: a philosophical overview’, in A Malachowski (ed), Business ethics: critical perspectives on business and management, Routledge, London and New York,pp. 50-56.

Dowling, GR 2014, ‘The curious case of corporate tax avoidance: is it socially irresponsible?’, Journal of Business Ethics, vol. 124, no. 1, pp. 173–184.

Hansen, DR, Crosser, RL & Laufer, D 1992, ‘Moral ethics v. tax ethics: the case of transfer pricing among multinational corporations’, Journal of Business Ethics, vol. 11, no. 9, pp. 679-686.

Kavoussi, B 2012, ‘Google Chairman Eric Schmidt Defends Tax Dodge: ‘It’s Called Capitalism’’, The Huffington Post, 13 December, viewed 6 January 2016, .

Markham, M 2005, The transfer pricing of intangibles, Kluwer Law International.

Otusanya, OJ 2011, ’The role of multinational companies in tax evasion and tax avoidance: the case of Nigeria’, Critical Perspectives on Accounting, vol. 22, pp. 316–332.

Otusanya, OJ 2016, ‘CSR and the enterprise culture of multinational corporations in developing countries’, in SO Idowu & AS Kasum (eds), People, planet and profit: socio-economic perspectives of CSR, Routledge, New York, pp. 29-50.

Rawlinson, K 2016, ‘Google agrees to pay British authorities £130m in back taxes’, The Guardian, 23 January, viewed 6 January 2016, .

Shaw, WH 2017, Business ethics, 9th edn, Cengage Learning, Boston, MA.

Siddaiah, T 2010, International financial management, Dorling Kindersley (India) Pvt. Ltd, New Delhi.

Sikka, P & Willmott, H 2010, ‘The dark side of transfer pricing: Its role in tax avoidance and wealth retentiveness’, Critical Perspectives on Accounting, vol. 21, pp. 342–356.

Srivastava, RM 2008, Multinational financial management, Excel Books, New Delhi.

Wetherly, P & Otter, D 2014, The business environment: themes and issues in a globalising world, 3rd edn, Oxford University Press, Oxford.

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