Why MNCs HAVE NO responsibility to pay tax to their “home countries” and to countries where they make profits?
Tax avoidance is totally legal
Tax avoidance is the act of minimizing tax liability within the limits of the law or without breaking the law. In other words, taxpayers can use legitimate methods to reduce the amount of tax payable in association with their financial activities. Such methods to allow taxpayers to avoid paying tax to the government may include the followings:
- Using tax deductions for decreasing business expenses and business tax bill
- Delaying the payment of tax until a later date with an appropriate tax deferral plan
- Taking advantage of tax credits for legal purposes like business purchases, benefiting the company’s employees for sick leave and family leave
- Sheltering revenue from tax liability through the establishment of employee retirement plans.
Judge Learned Hand stated that "anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands." (Gregory v. Helvering 69 F.2d 809 - 1935)
Corporate and Governmental Perspectives of tax avoidance
Many executives believe that corporate taxes are already too high and that taking advantage of loopholes to reduce payments is legitimate. And many would also argue that the company’s fiduciary duty to maximize shareholder interests is paramount and that taking advantage of provisions and loopholes is legal and ethically defensible.
The corporate viewpoint generally is that:
- MNCs paying high taxes suffer a competitive disadvantage vis-a-viso firms located in lower-tax nations. Paying higher taxes means less money is left over, and this in turn means:
– Shareholders get smaller dividends, and
– Less is put back into R&D—which ultimately determines the competitiveness of the firm in global competition.
- Paying taxes only encourages profligate governments to spend more money on other programs.
- If government rules allow certain loopholes, it is the company’s fiduciary duty toward shareholders to use such loopholes to (legally) to avoid tax payments.
During mergers/acquisitions for “inversions,” the change of domicile is only for tax purposes—necessary operations and jobs would remain in the original nations.
My Thinking is :💨
Tax avoidance is the legal use of tax laws to reduce one's tax burden.
For instance, there are entirely legal and approved ways of “avoiding” tax liabilities for both individuals and businesses. Reducing your tax bill through effective planning is legal, ethical – and in some forms encouraged by government-authorized schemes. For example, claiming tax relief on capital investment, saving in a tax-exempt ISA, or saving for retirement by making contributions to a pension scheme are all legitimate forms of tax planning. The key point is that here we see tax relief obtained in the ways that the government intended.
MNCs' execution cost is very heavy, so MNC's Only goal is profit - maximization, not take social responsibility.NO one care about CSR, as no productivity created by CSR(window dressing)
Tax avoidance cannot be said to be unethical, because one has no positive obligation to share in the costs of any public good or action, which other people, even a majority, find necessary and conceive as a moral duty.
Tax avoidance is the smart way to make the MNC get more profits and Increase market share, this satisfied the shareholder benefits.
Hi, I also agree that tax avoidance is ethical. Because as you guy said, the companies also need to maximize their profits. They are not charity. It is reasonable for them to conduct such act. It is government responsibilities to fix the loopholes and find ways to redistribute resources. CSR activities, however, are very useful. Since the 00s, many have found that it is time to liberate the system that is considered inhumane. Hence many like to do business with a firm that is morally great. The window-dressing practices do make the consumers feel like that the brand is good, positive and caring. They may buy the products then. But the CSR activities are not compatible with tax avoidance as layman cannot understand its rationale. So it only has little use.
回覆刪除Group 2 Lai Wai Ching
回覆刪除Yes, CSR activities are meaningful, as it can create a good reputation. but there are many ways to improve image, also attract more customers to buy the product, such as a good advertisement or the plan of loyal customers. CSR activities need heavy costs to execute and not so efficient for MNC's business model. And tax avoidance is a convenient way to reduce costs, also it is legal and ethical to shareholders, as they deserve to get many profits when they are taking a high risk.