Question

Strategic Management Edition 4. - Frank T. Rothaermel

IKEA - Chapter 10

Is there any special consideration a firm should have for its “home country”? Is it ethical to keep profits outside the home country in offshore accounts to avoid paying domestic corporate taxes?

Answer 1

Answer: Yes, The firms should have special consideration that the firms should have for its home country. Some of them are

1. The firms should understand that they are expanding their international footprints so that their home countries benefit economically from the move

2. They should act as a responsible citizen of their home country and ensure that a part of the overseas profit is invested in the development of their home country

3. They should not compromise with the interests of their home countries

4. The firms should ensure that by outsourcing, the comparative advantage in terms of intellectual property they possess is not compromised

It is totally unethical for the companies to keep the profits outside the home country for avoiding paying the domestic corporate taxes. When these companies are registered in their home countries and declare it as their headquarters, then they have an ethical and moral responsibility to obey the law of the land and follow the rules and pay their due taxes. This practice is a form of tax evasion strategy which is morally, ethically and legally wrong.